. UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY o tl p INDIAN CONTRACT ACT, WITH A COMMENTAKY, CRITICAL AND EXPLANATORY. SIR FREDERICK POLLOCK, BART., OF LINCOLN'S INN, BARRISTER-AT-LAW ; D.C.L., HON. LL.D., EDINBURGH, DUBLIN, AND HARVARD ; PAST FELLOW OF TRINITY COLLEGE, CAMBRIDGE, AND HON. FELLOW OF C.C.C., OXFORD; LATE CORPUS PROFESSOR OF JURISPRUDENCE, OXFORD; CORRESPONDENT OF Till: INSTITUTE OF FRANCE ; AUTHOR OF " PRINCIPLES OF CONTRACT," ETC. ASSISTED BY DINSHAH FARDUNJI MULLA, M.A., LL.B., ADVOCATE, HIGH COURT, BOMBAY ; FELLOW OF BOMBAY UNIVERSITY ; PRINCIPAL AND PERRY PROFESSOR OF JURISPRUDENCE, GOVERNMENT LAW SCHOOL, BOMBAY ; AUTHOR OF " COMMENTARIES ON THE CODE OF CIVIL PROCEDURE," " PRINCIPLES OK MAHOMEDAN LAW," ETC. SECOND EDITION. LONDON : SWEET & MAXWELL, LIMITED, 3, CHANCERY LANE, BOMBAY : THACKER & COMPANY, RAMPART Row, |looksllcrs an& |JMts{jErs. N. M. TRIPATHI & CO., PRINCESS STREET, KALKADEVI ROAD, fBoahscllers antr |3ublis frets. 1909. [All Miyhtx, iitciuilinij Itiylit of Tiwtttt/iitioH, l&ferred.] BKADBURY, AGNEW, & CO. LI)., PRINTERS, LONDON AKD TONBR1DGE. I f PREFACE TO THE SECOND EDITION. IN the present edition, besides the additions rendered necessary by decisions of Indian and English Courts reported since the publica- tion of the first, some new features are introduced in order to make the book more useful to practitioners. It has been thought well to enlarge the commentaries on the chapters dealing with Sale, Agency, and Partnership, and to entrust the two former topics to writers who have given* special attention to them. Accordingly the commentary on Sale has been revised by Mr. James Bromley Eames, B.C.L., of the Middle Temple, and the commentary on Agency by Mr. William Bowstead, of the same Inn. I have no hesitation in vouching for the quality of their work, though no such warranty seems needful. Then I have myself made such additions as seemed desirable in the chapter on Partnership. Eeferences have now been added to the unofficial reports com- monly cited in British Indian Courts, namely, the Calcutta Weekly Notes, the Bombay Laiv Reporter, the Madras Law Journal, the Allahabad Weekly Notes, and the Punjab Record. In my own view the regular reports in the High Courts are already too voluminous and indiscriminate, but this does not make it less probable that they sometimes omit decisions of real importance. At all events the other reports mentioned are current even in the High Courts, and text- writers can only take things as they find them. This is not the season to complain of the Government of India for not having leisure to undertake a thorough revision of the Contract Act. One can only repeat that it has remained unrevised longer than any codifying Act ought, and hope that the Legislative Department will not lose sight of the matter. F. P. LINCOLN'S INN, January, 1909. PREFACE TO THE FIRST EDITION. THE Indian Contract Act is in effect, and for the reasons explained in our commentary on the first section, a code of English law. Like all codes based on an existing authoritative doctrine, it assumes a certain knowledge of the principles and habits of thought which are embodied in that doctrine. But, unlike European codes, it has to be applied in practice by magistrates and pleaders to whom the materials and surroundings of its own system are unfamiliar. It seems proper, therefore, that editors of an Anglo-Indian Code should give a pretty full exposition of those fundamental notions in the Common Law which are concisely declared, with or without modification, by the text. How far they have in fact been modified, and whether by deliberate design or by accident in the execution, is a question of interpretation depending not on the text alone, but on its relations to the English authorities which the framers of the code had before them, and to the subsequent development of English law. My first object has been to make those relations as clear as possible. For this purpose I have given more elementary explana- tion than would be required in a treatise addressed only to English lawyers or to practitioners in the High Courts, while I have endeavoured to avoid entering on details of procedure and other purely English technical matters beyond what w r as necessary for understanding the substance of the authorities. We also have by this time a considerable number of reported Indian decisions on the Act. As it did not seem to me possible for an English lawyer who had not practised in India to deal adequately with these, I consented to undertake this edition only on the terms of the Indian cases being collected and digested by a competent person within the jurisdiction. Accordingly this task was entrusted to Mr. D. F. Mulla, who has performed it, so far as I can judge, completely and faithfully. I do not profess to have verified all his references, but I have verified and considered enough of them to be satisfied that his work is trustworthy. With the form of it I have VI PREFACE TO THE FIRST EDITION. interfered as little as might be, though some rearrangement and recasting was needful in order to combine Mr. Mulla's portion with my own in a continuous whole. The result is that Mr. Mulla, while he is answerable for the inclusion of all Indian reported cases which ought to be cited for the use of practitioners, is not necessarily answerable for the distribution of them as appropriate to this or that section, or for the opinions expressed. At the same time I have seldom found occasion to differ with Mr. Mulla. Much oftener I have been able to strengthen his conclusions by the analogy of recent English doctrine, and to state them with increased confidence. The present commentary is critical as well as explanatory. The criticism unavoidably follows the Act section by section, and is therefore broken up into many comments on details. In order to give a general notion beforehand of the causes which have made it necessary, and the spirit, I trust no captious one, in which it was undertaken, I now repeat the words I used in an unsigned review of Dr. Whitley Stokes's "Anglo-Indian Codes" on the publication of the first volume in 1887 : " Every written law which goes beyond mere regulation of details is a work of art ; it can no more afford to dispense with unity of design and continuity of execution than a monumental building. It should proceed from one mind, or from very few minds working in intimate association, and it should be framed, if not by one hand, at least under uniform general direction and by hands trained in one school. Where these conditions cannot be satisfied in the first instance, the next best thing is to secure a certain measure of uniformity by careful authoritative revision in the final stage. In England even this is seldom attain- able. . . . The Government of India is less hampered, though not quite so free as might be supposed, and it may be said to have made good progress in founding a school of legislative composition. The results obtained are, on the whole, worthy of the succession of distinguished men whose services in the Governor-General's Council are commemorated by Mr. Whitley Stokes ; and we must add that no small share of the labour and the credit belongs to Mr. Stokes himself. Still there has been in some cases a want of continuity. Measures long held in suspense, perhaps by excessive scruples, have been finished and passed in something like haste. Not only the work of different hands, but work done from quite different points PREFACE TO THE FIRST EDITION. Vll of view, has been pieced together with an incongruous effect. . . . Another source of unequal workmanship, and sometimes of positive error, is that the framers of the Indian Codes, and of the Contract Act in particular, were tempted to borrow a section here and a section there from the draft Civil Code of New York, an infliction which the sounder lawyers of that State have been happily successful so far in averting from its citizens. This code is in our opinion, and we believe in that of most competent lawyers who have examined it, about the worst piece of codification ever produced. It is constantly defective and inaccurate, both in apprehending the rules of law which it purports to define and in expressing the draftsman's more or less satisfactory understanding of them. The clauses on fraud and misrepresentation in contracts which are rather worse, if anything, than the average badness of the whole were most unfortunately adopted in the Indian Contract Act. Whenever this Act is revised everything taken from Mr. Dudley Field's code should be struck out, and the sections carefully recast after independent examination of the best authorities." In fact, the Contract Act passed through not less than three distinct stages.' First, there was the draft prepared in England by the Indian Law Commission, uniform in style and possessing great merit as an elementary state- ment of the combined effect of common law and equity doctrine as understood about forty years ago. By the courtesy of the India Office I have had the use of this draft, and it is often referred to in the commentary for comparison with the final text of the Act. Next, this was revised and in parts elaborated by the Legislative Department in India. The borrowing from the New York draft Code seems to belong to this phase. Lastly, Sir James Stephen made or supervised the final revision, and added the introductory definitions, which are in a wholly different style and not altogether in harmony with the body of the work. Evidently this process could not satisfy the conditions of a model code. It is much to the credit of the workmen that the result, after allowing for all drawbacks, was a generally sound and useful one. In many of the arguments and some of the judgments in the reports of the Indian High Courts there appears, if I mistake not, a tendency to follow English authorities too literally (though in any case they are not positively binding on Indian Courts), con- sidering only what the Courts actually decided in England, and Vlll PREFACE TO THE FIRST EDITION. not what they would have decided if their office had been to apply the principles of the Common Law to the facts of Indian society. The best way to counteract such a tendency is not to neglect the letter of English judgments, which is not practicable and would not be useful, but to enter more fully into their spirit and distin- guish their permanent from their local and accidental elements. To this object I have endeavoured, within the bounds of my undertaking, to contribute. F. P. LINCOLN'S INN, May, 1905. TABLE OF CONTENTS. PAOK PREAMBLE 1 PRELIMINARY. SECTIONS 1. Short title 1 Extent ............. 1 Commencement ........... 1 Enactments repealed .......... 1 Law anterior to Contract Act ....... 1 Introduction of native law of contract into India . ... 2 Native law of contracts as administered by High Courts . . 3 Law administered in Mufassal Courts 4 Applicability of the Act 5 Scope of the Act .......... 6 How far native law of contracts still in force .... 6 Acts and regulations not expressly repealed . . . . . 7 Saving of usage or custom of trade 7 Evidence as to usage of trade 8 Choice of law governing contract 9 Act not retrospective . . . ... . . 10 2. Interpretation clause .......... 10 Summary of s. 2 . . . . . . . . 11 Proposal and promise ......... 12 Promise and consideration . . . . . . 13 Definition of consideration 14 Past consideration .......... 20 Forbearance as consideration 22 Compromise ........... 23 Apparent forbearance when really an act ..... 23 Mutual promises . . . . . . . . 23 Promises of forbearance ........ 24 Agreement and contract 25 CHAPTER I. OF THE COMMUNICATION, ACCEPTANCE, AND REVOCATION OF PROPOSALS. 3. Communication, acceptance, and revocation of proposals . . 26 Communication of special conditions 27 Incorporation of prospectus in a policy of assurance ... 29 4. Communication when complete ........ 29 Agreement between parties at a distance ..... 30 X TABLE OF CONTENTS. SECTIONS PAGE 4. Communication when complete continued. English rules ........... 31 Revocation arriving before acceptance 32 5. Revocation of proposals and acceptances . . . . 33 Revocation of offers 33 Sale by auction .......... 34 Standing offers ..... ..... 35 6. Revocation, how made .......... 36 Notice of revocation 37 Revocation not presumed . . . . . . . . 38 Lapse of time for acceptance ....... 39 Condition precedent to acceptance 39 Death or insanity of proposer ....... 40 7. Acceptance must be absolute ......... 40 Certainty of acceptance ........ 40 Apparent without real acceptance 44 Manner of acceptance ......... 44 8. Acceptance by performing conditions, or receiving consideration . 45 General offers 45 Acting on offer when sufficient acceptance . . . . . 47 9. Promises, express and implied 50 Express and tacit promises . . . . . . 50 CHAPTER II. OF CONTRACTS, VOIDABLE CONTRACTS, AND VOID AGREEMENTS. 10. WJiat agreements are contracts . . . . . . . .51 As to contracts required to be in writing 52 Oral and documentary evidence 52 Variance between print and writing . . . . 52 As to law relating to registration ...... 52 11. Who are competent to contract ........ 53 Infancy 53 Age of majority 54 Minor's contract 55 Necessaries 57 Specific performance 58 Fraudulent representation 58 Persons otherwise disqualified from contracting ... 59 12. What is a sound mind for the purpose of contracting . . . . 61 Doubtful effect of the section 61 13. " Consent " defined 62 Apparent and real consent ........ 62 Ambiguity ............ 64 Fundamental error as to nature of transaction .... 65 Consent and estoppel 67 Parda-nishin cases 68 Error as to person of other party 68 Error as to subject-matter of agreement ..... 69 Coercion wholly excluding consent 70 TABLE OF CONTENTS. XI 14. " Free consent " defined . . . . . - . . . .70 Unfree consent .......... 71 15. " Coercion " defined .......... 71 Extent of ' ' coercion " under the Act 72 Act forbidden by Penal Code 72 16. " Undue influence " defined . . . . . . 74 Doctrine of undue influence in England 75 Sub-s. 1 : Undue influence generally 76 Sub-s. 2 : Different forms of influence ...... 77 Mental distress .......... 79 Transactions with Parda-nishin women ..... 80 Who is a Parda-nishin ......... 82 Sub-s. 3 : Rule of evidence 83 Unconscionable bargains . . . . . . 83 Lapse of time and limitation 87 17. "Fraud" defined 88 Fraud in general .......... 88 Acts and omissions specially declared to be fraudulent . . . 90 Mere non-disclosure ......... 91 18. " Misrepresentation " defined . . . . . . 91 Principles of English law as to misrepresentation ... 92 Misrepresentation of fact or law 97 19. Voidability of agreements ivitliout free consent. . . . 98 Scope of section 99 Exception : Means of discovering truth 100 Explanation : As to " causing consent " . . . . 102 Rescission of voidable contracts 103 Specific performance ......... 103 19A. Power to set aside contract induced by undue influence . . . 103 20. Agreement void where both parties are under mistake as to matter of fact 105 Scope of the section 105 Mistake must be as to existing fact . . . . . . 106 Specific performance ......... 108 Rectification .......... 108 Compensation ........... 108 21. Effect of mistakes as to law 108 22. Contract caused by mistake of one party as to matter of fact . . Ill 23. What considerations and objects are lawful, and what not . . 112 Unlawful objects . . . . . . . . 113 Acts " forbidden by law " 117 1. Legislative enactments ....... 120 2. Rules of Hindu and Mahomedan law .... 123 3. Other rules of law in force in British India . . . 125 1. Trading with enemy 129 2. Stifling prosecution ........ 130 3. Champerty and maintenance ...... 132 4. Interference with course of justice ... . . 138 5. Marriage brocage contracts ...... 138 Xll TABLK OF CONTENTS. 23. What considerations and objects are lawful, and ivhat not continued. Unlawful objects continued. 6. Agreements tending to create interest against duty . . 142 7. Sale of public offices 142 8. Agreements tending to create monopolies . . . . 143 Waiver of illegality 144 Pleadings . . . . . . . . . 144 Other statutory provisions of similar effect 1. Trust Act 144 2. Transfer of Property Act IV of 1882 . . 144 3. Indian Evidence Act I of 1872 . . . 144 4. Specific Belief Act I of 1877 . . . . 144 Void Agreements. 24. Agreements void if considerations and objects unlawful in part . 145 Entire or divisible agreements 145 Indian Trusts Act, 1882 147 25. Agreement ^vithout consideration, void, unless it is in writing and registered ............ 148 Or is a promise to compensate for something done . . . 148 Or is a promise to pay a debt barred by limitation law . . 148 Consideration 149 Forbearance and compromise as consideration . . . 150 Promise to perform existing duty ...... 151 Transfer of immoveable property ....... 153 Negotiable instruments 154 Registered writing 154 Compensation for voluntary services ...... 156 Promise to pay a barred debt ........ 158 Agent generally or specially authorised in that behalf . . 159 Debt 159 26. Agreement in restraint of marriage void ...... 162 27. Agreement in restraint of trade void 163 Saving of agreement not to carry on business of which goodwill is sold 163 Of agreement betiveen partners prior to dissolution . . . 163 Or during continuance of partnership 163 Agreements in restraint of trade 164 Restraint during term of service 166 Public policy . . 166 Agreements not in restraint of trade 168 Trade combinations . . 168 Lex loci contractus 172 28. Agreements in restraint of legal proceedings void . . . . 172 Saving of contract to refer to arbitration dispute tJiat mat/ (trine . 172 Suits barred by such contracts [rep.] 172 Saving of contract to refer questions that have already arisen . 172 Scope of the section ......... 172 TABLE OF CONTENTS. Xlll SECTIONS PAGE 28. Agreements in restraint of legal proceedings void continued. Limitation of time to enforce rights under a contract . . 175 Remedies for breach of agreement to refer ... . . 177 Conventional restrictions of evidence ...... 177 29. Agreements void for uncertainty 177 Ambiguous contracts . . . . . . . . ' . 178 30. Agreements by way of wager void ........ 179 Exception in favour of certain prizes for horse racing . . . 180 Section 294A of the Indian Penal Code not affected . . . . 180 Wagering contracts 180 What is a wager ? . . 180 Agreements collateral to wagering contracts .... 186 Speculative transactions ........ 189 Oral evidence of agreement being by way of wager . . . 190 Wagering policies . . . . . . . ... 193 Void . 194 What is a lottery ? 195 CHAPTER III. OF CONTINGENT CONTRACTS. 31. " Contingent contract " defined ........ 195 Section in general 196 Contingency dependent on act of party 197 32. Enforcement of contracts contingent on an event happening . . 199 33. Enforcement of contracts contingent on an event not happening . 200 34. When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person ..... 200 35. When contracts become void which are contingent on happening of specified event within fixed time ....... 200 When contracts may be enforced which are contingent on specified event not happening within fixed time ...... 201 36.. Agreement contingent on impossible events void ..... 201 CHAPTER IV. OF THE PERFORMANCE OF CONTRACTS. Contracts ivhich must be performed. 37. Obligation of parties to contracts 202 Performance and discharge 202 Succession to benefit of contract 203 Assignment of contracts ......... 205 Any other law 209 38. Effect of refiisal to accept offer of performance . , . . 209 Tender 210 Offer must not be of part only ....... 211 Offer must be unconditional ....... 212 Able and willing 212 XIV TABLri OF CONTENTS. 38. Effect of refusal to accept offer of performance continued. Tender of instalments 213 Reasonable opportunity 213 Tender of money ......... 215 Legal tender 215 Offer to one of several joint promisees 215 39. Effect of refusal of party to perform promise wholly . . . . 215 Refusal to perform contract 216 Contract of service 222 Insolvency of promisor 223 By whom Contracts must be performed. 40. Person by whom promise is to be performed ... . . 223 Personal contracts 224 41. Effect of accepting performance from third person . . . . 225 42. Devolution of joint liabilities ........ 225 43. Any one of joint promisors may be compelled to perform . . . 226 Each promisor may compel contribution ...... 226 Sharing of loss by default in contribution . . . . . . 226 Joint promisors 227 Effect of decree against some only of joint promisors . . . 227 Suit against one of several partners 229 Contribution between joint promisors 231 When liability to contribute arises ...... 231 Contribution as between judgment debtors . . . . 231 44. Effect of release of one joint promisor ...... 232 45. Devolution of joint rights ......... 233 Promise to two or more persons jointly 233 Right to performance of promises during joint lives . . . 233 Validity of discharge by one of several joint promisees . . 234 Suit by surviving partner ........ 235 Suit by representative of deceased partner 236 Right of performance of representative jointly with survivor . 236 Survivorship in case of Government securities . . . 236 Time and Place for Performance. 46. Time for performance of promise where no application is to be made and no time specified 237 Reasonable time 237 47. Time and place for performance of promise where time is specified, and no application to be made ....... 238 Common Law rule 238 Delivery on Sunday 238 48. Application for performance on certain day to be at proper time and place 239 49. Place for performance of promise where no application to be made and no place fixed for performance ...... 239 Rule of Common Law ......... 239 Place of delivery ' 240 TABLE OF CONTENTS. XV SECTIONS PAGE 50. Performance in manner or at time prescribed or sanctioned by promisee ............ 241 Performance of Reciprocal Promises. 51. Promisor not bound to perform, unless reciprocal promisee ready and willing to perform ......... 241 Simultaneous performance ........ 242 Waiver of performance ........ 244 Readiness and willingness ........ 244 Averment of performance 245 52. Order of performance of reciprocal 'promises ..... 246 53. Liability of party preventing event on which contract is to take effect 246 Impossibility created by act of party 247 54. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises . . . . . 248 Default of promisor in first performance 249 55. Effect of failure to perform at fixed time, in contract in which time is essential ............ 250 Effect of such failure when time is not essential .... 250 Effect of acceptance of performance at time other than that agreed upon . . . . . . . . . . . . . 250 Time when of essence of contract ...... 251 56. Agreement to do impossible act ........ 252 Contract to do act afterwards becoming impossible or unlawful . 252 Compensation for loss through non-performance of act known to be impossible or unlawful ......... 252 Impossibility in general ......... 253 57. Reciprocal promise to do things legal and also other things illegal . 257 Scope of the section 257 58. Alternative promise, one branch being illegal . . . . . 257 Appropriation of Payments. 59. Application of payment where debt to be discharged is indicated . 258 Appropriation of payments ........ 258 Several distinct debts 259 60. Application of payment where debt to be discharged is not indicated 259 Creditor's right to appropriate 259 61. Application of payment where neither party appropriates . . 260 Contracts which need not be performed. 62. Effect of novation, rescission, and alteration of contract . . . 261 Novation 261 Alteration of contract ......... 264 Transfer of actionable claims 265 Promissory note on account of pre-existing debt . . . . 265 Unauthorised alteration of documents 265 Indian decisions .......... 266 63. Promisee may dispense with or remit performance of promise . . 271 Rule of the common law 272 Scope of the section . . 273 XVI TABLE OF CONTENTS. 63. Promisee may dispense iviih or remit performance of promise continued. Remission of performance 273 Agreement to extend time ........ 274 64. Consequences of rescission of voidable contract 275 Scope of the section 275 Minor's contract 276 Election to rescind 276 65. Obligation of person who has received advantage under void agree- ment or contract that becomes void 278 Duties of restitution 278 Scope of the section 278 Limitation 283 66. Mode of communicating or revoking rescission of voidable contract . 284 67. Effect of neglect of promisee to afford promisor reasonable facili- ties for performance 284 Refusal or neglect of promisee 285 CHAPTER V. OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT. 68. Claim for necessaries supplied to person incapable of contracting, or on his account 285 Minors 286 What are necessaries 286 69. Eeimbursement of person paying money due by another, in pay- ment of ivhicli lie is interested 286 English law 287 Suit for contribution 290 Person making payment must not be legally liable to pay . . 293 Payment must be to another ....... 293 70. Obligation of person enjoying benefit of non-gratuitous act . . . 294 Non-gratuitous act done for another 294 71. Responsibility of finder of goods 298 Liability of finder 298 72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion 299 Payment under mistake of fact or mistake of law . . . 299 Involuntary payment . 300 Wrongful payment 301 CHAPTER VI. OF THE CONSEQUENCES OF BREACH OF CONTRACT. 73. Compensation for loss or damage caused by breach of contract . . 302 Compensation for failure to discharge obligation resembling those created by contract 302 Rule in Hadley v. Baxendale 311 Contracts relating to immoveable property 316 Interest by way of damages 318 Section applies only where contract broken .... 320 TABLE OF CONTENTS. \A SECTIONS . PAGE 74. Compensation for breach of contract where penalty stipulated for . 320 Penalty and liquidated damages 322 Amendment 323 Stipulations for interest . . . ' 325 I. Stipulations for enhanced rate of interest . . . 326 II. Stipulations for compound interest 331 III. Stipulations for payment of interest if principal not paid on due date 334 75. Party rightfully rescinding contract entitled to compensation . . 342 CHAPTER VII. SALE OF GOODS. When Property in Goods sold passes. 76. " Goods " defined 342 Frame of the chapter 342 Meaning of " goods " 343 Moveable property . . 343 Old English forms of action . 343 77. " Sale " defined 344 Essential requisites of sale 344 Contract of sale distinguished from contract for work . . . 345 Sale or bailment 347 Sale or hire 347 Sale or agency 347 78. Sale, ho^v effected 347 History of the law 348 Delivery 350 When property passes 350 Evidence . 351 Sale or return .......... 351 Earnest . . . 353 79. Transfer of ownership of thing sold which has yet to be ascertained, made or finished 354 Transfer of ownership . 354 Unfinished ships 355 80. Completion of sale of goods which the seller is to put into state in which buyer is to take them 357 Transfer of ownership ......... 357 81. Completion of sale of goods when seller has to do anything thereto in order to ascertain price ......... 359 Transfer of ownership ......... 360 82. Completion of sale when goods are unascertained at date of contract 361 83. Ascertainment of goods by subsequent appropriation . . . . 361 Delivery of goods to carrier 363 84. Ascertainment of goods by seller's selection 368 85. Transfer of ownership of moveable property, when sold together with immoveable 369 Mixed sales of moveable and immoveable property . . . 369 i.e. b XViii TABLE OF CONTENTS. 86. Buyer to bear loss after goods have become his property . . . 369 Risk of destruction or injury 370 87. Transfer of ownership of goods agreed to be sold while non-existent 371 Sale of goods to be produced in future 372 88. Contract to sell and deliver, at a future day, goods not in seller's possession at date of contract . . . . . . . 373 Future delivery 374 89. Determination of price not fixed by contract ... . . 374 Delivery. 90. Delivery how made 375 Acceptance and receipt 376 " Symbolic " delivery . . . 377 Constructive delivery 378 91. Effect of delivery to 'wharfinger or carrier 380 Delivery to wharfinger or carrier ....... 381 92. Effect of delivery 382 Part delivery 382 93. Seller not bound to deliver until buyer applies for delivery . . 384 Buyer's duty to apply for delivery 384 94. Place of delivery 384 Place of delivery .......... 384 Distinction between contract of sale of goods and contract to deliver goods in payment of debt 385 Seller's Lien. 95. Seller's lien 385 Seller's lien 385 96. Lien where payment to be made at a future day, but no time fixed for delivery ........... 387 " Insolvency" defined . . . . . . . * . 387 Seller's lien where the sale is on credit . . . . . . 387 97. Seller's lien whefe payment to be made at future day, and buyer allows goods to remain in seller's possession ..... 389 Seller's lien where the price is to be paid at a future day . . 389 Effect of buyer's insolvency before completion of contract . . 390 98. Seller's lien against subsequent buyer ....... 390 Lien against subsequent buyer 390 Stoppage in Transit. 99. Power of seller to stop in transit 391 Stoppage in transit 391 Conditions under which right of stoppage in transit may be exercised 392 Title to seller's rights 393 100. When goods are to be deemed in transit . . . . . 394 English authorities 395 Indian authorities 399 Public wharves 400 101. Continuance of right of stoppage 400 TABLK OF CONTENTS. XIX 102. Cessation of rig Id on assignment by buyer of bill of lading . . 401 Rule of English law . . 401 Bills of Lading Act 402 103. Stoppage where bill of lading is pledged to secure specific advance . 402 English authorities 403 Specific advance .......... 405 104. Stoppage how effected ......... 405 105. Notice of setter's claim .......... 406 106. Right of seller on stoppage . . . . . . . . 407 He-sale. 107. Re-sale on buyer's failure to perform 407 Re-sale 407 Right of re-sale does not bar other remedies . . ... 408 Re-sale clause in indents 409 Reasonable time .......... 409 Title. 108. Title conveyed by seller of goods to buyer . . . . . . 409 History of the section . . . . . . . . 411 Indian Factors Acts 412 Character of vendor's possession 413 Seller with voidable title 416 Good faith, etc 417 Documents showing title of goods 418 Joint owners : Presumption in case of joint Hindu family . . 418 Delivery order 418 Warranty. 109. Seller's responsibility for badness of title 419 Warranty and condition ........ 419 Seller responsible for title ........ 420 110. Establishment of implied warranty of goodness or quality . . 421 Warranty implied by usage of trade . . . . . . 421 Merchandise Marks Act IV of 1889 422 111. Warranty of soundness implied on sale of provisions . . . . 422 Warranty on sale of provisions ....... 422 112. Warranty of bulk implied on sale by sample . . . . . 423 Warranty on sale of goods by sample ...... 423 113. Warranty implied where goods are sold as being of a certain denomination ........... 425 Warranty as to denomination of goods . . . . . . 425 114. Warranty where goods ordered for a' specified purpose . . . 426 English authorities . . . . - . . . . . 427 115. Warranty on sale of article of well-known ascertained kind' . . 428 No warranty implied on sale of a specific chattel . . . . 429 116. Seller ivhen not responsible for latent defects ..... 429 What is a latent defect 430 XX TABLE OF CONTENTS. SECTIONS PAGE 117. Buyer's right on breach of warranty ...... 430 Consequences of breach of warranty : Where a specific article is sold 430 118. Right of buyer on breach of warranty in respect of goods not ascertained ........... 431 Where goods not ascertained at time of contract . . . 432 Miscellaneous. 119. When buyer may refrise to accept, if goods not ordered are sent with goods ordered ........... 433 Where goods not ordered are sent with goods ordered . . 433 120. Effect of wrongful refusal to accept 434 121. Right of seller as to rescission on failure of buyer to pay price at time fixed 436 122. Sale and transfer of lots sold by auction 437 123. Effect of use by seller of pretended biddings to raise price . . 437 CHAPTER VIII. OF INDEMNITY AND GUARANTEE. 124. " Contract of indemnity " defined, 438 Indemnity . . . . . . . . - . . . 438 125. Rights of indemnity-holder when sued . . . . . . 439 Rights of promisor 441 126. "Contract of guarantee," "surety," "principal debtor," and " creditor " ........... 441 127. Consideration for guarantee 442 Consideration for a contract of guarantee 442 128. Surety's liability 443 Proof of surety's liability . 443 Liability for whole or part of debt 444 Surety's liability where original contract is void or voidable . . 445 Administration and surety bonds 446 Limitation 446 129. " Continuing guarantee " 446 Continuing guarantee 447 130. Revocation of continuing guarantee 447 Future transactions 448 Notice 449 Sureties for guardians and administrators 449 131. Revocation of continuing guarantee by surety's death . . . 450 What is a " contract to the contrary " 450 132. Liability of tivo persons, primarily liable, not affected by arrange- ment between them that one shall be surety on other's default . 451 Joint debtors and suretyship 451 133. Discharge of surety by variance in terms of contract . . . 452 Valuation of contract between creditor and principal . . . 453 TABLE OF CONTENTS. XXI 134. Discharge of surety by release or discharge of principal debtor . 457 Creditor's discharge of principal debtor 458 Discharge by operation of law 459 Creditor's omission to sue principal within limitation period . . 459 Guarantee under an agreement to give time to judgment debtor 462 135. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor . . . . . . 462 Contract to give time to principal debtor 463 Contrary agreement 464 136. Surety not discharged when agreement made with third, person to give time to principal debtor ........ 464 137. Creditor's forbearance to sue does not discharge surety . . . 465 Forbearance to sue, what is 465 138. Release of one co-surety does not discharge others . . . . 466 Release of one of several sureties ...... 466 139. Discharge of surety by creditor's act or omission impairing surety's eventual remedy - . 467 Act or omission of creditor tending to impair surety's remedy . 467 Act or omission impairing surety's eventual remedy . . . 468 140. Bights of surety on payment or performance ..... 469 141. Surety's right to benefit of creditor's securities . . ... 471 Surety's right to benefit of securities ...... 472 When surety becomes entitled to benefit of creditor's securities . 473 142. Guarantee obtained by misrepresentation invalid .... 474 143. Guarantee obtained by concealment invalid ... . . 474 Guarantee obtained by misrepresentation or concealment . . 475 What is a " material circumstance " 476 144. Guarantee on contract that creditor shall not act on it until co-surety joins ............ 477 145. Implied promise to indemnify surety 478 Surety's right to indemnity ........ 478 146. Co-sureties liable to contribute equally . . . . . . 480 Contribution by co-sureties ........ 480 147. Liability of co-sureties bound in different sums ... . . 481 CHAPTER IX. OF BAILMENT. 148. " Bailment," "bailor," and " bailee" defined ..... 482 Nature of transaction 483 No bailment where whole property transferred .... 484 149. Delivery to bailee how made 485 150. Bailer's duty to disclose faults in goods bailed .... 485 151. Care to be taken by bailee ......... 487 Common carriers . . . . . . . . . 488 Carriers by railway 490 Innkeeper ........... 491 Burden of proof .......... 491 Bailee's liability for negligence of servants 492 XX 11 TABLK OF CONTENTS. SECTIONS I'AiK 152. Bailee when not liable for loss, etc., of thing bailed . . . . 492 Care to be taken by bailee ........ 493 153. Termination of bailment by bailee is net inconsistent with conditions . 493 154. Lin InlHij of bailee making unauthorised use of goods bailed . . 494 155. Effect of mi.rture, until bailor's consent, of his (foods with bailee's . 495 156. Effect of mixture, ivithout bailor's consent, when the goods can be separated 496 157. Effect of mixture, without bailor's consent, when the goods cannot be separated . . . . . . . . . . . 496 158. Repayment by bailor of necessary expenses 497 159. Restoration of goods lent gratuitously 497 160. Return of goods bailed, on expiration of time or accomplishment of purpose . . . . . . . . . . . . 498 161. Bailee's responsibility ^vhen goods are not duly returned . . . 498 162. Termination of gratuitous bailment by death 499 163. Bailor entitled to increase or profit from goods bailed . . . 499 164. Bailor's responsibility to bailee ........ 499 165. Bailment by several joint owners . . . . . . . 500 166. Bailee not responsible on redelivertj to bailor without title . . 500 Estoppel of bailee 500 167. Right of third person claiming goods bailed ..... 501 168. Right of finder of goods ; may sue for specific reward offered . . 502 169. When finder of thing commonly on sale may sell it .... 502 170. Bailee's particular lien ......... 503 Principle of bailee's lien ........ 503 Contract to the contrary . . . . . . . 504 171. General lien of bankers, factors, ivharfingers, attorneys, and policy - brokers 504 General as distinct from particular lien : Bankers . . . . 504 Factor ... 506 Wharfingers 507 Attorneys 508 Bailment of Pledges. 172. " Pledge," "pawnor" and "pawnee " defined . . . . . 509 173. Pawnee' 's right of retainer 510 174. Pawnee not to retain for debt or promise other than that for which goods pledged . Presumption in case of subsequent advances . . 510 175. Pawnee's right as to extraordinary expenses incurred . . . 510 176. Pawnee's right where pawnor makes default ... . 511 Limitation ........... 512 177. Defaulting pawnor' s right to redeem ....... 513 Limitation ........... 513 178. Pledge by x>osscssor of goods, or of documentary title to good* . . 513 Indian Factors Acts 513 Character of pledger's possession 513 Antecedent debt .........' 515 Good faith, etc 515 Pledge by co-owner in possession ...... 516 Competition between prior mortgagee and subsequent pledgee . 516 TABLE OF CONTENTS. XX111 SECTIONS PAGE 179. Pledge where pawnor has only a limited interest .... 516 Suits by Bailees or Bailors against Wrong-doers. 180. Suits by bailor or bailee against wrong -doer . . . . 516 181. Apportionment of relief of compensation obtained by such suits . 517 CHAPTER X. AGENCy. Appointment and Authority of Agents. 182. " Agent " and " principal " defined ....... 517 Nature of agency in general . . . . . . . . 518 Del credere agent ......... 518 Co-agents ........... 519 183. Who may employ agent ......... 519 184. Who may be an agent 520 185. Consideration not necessary . . . . . . . . 520 186. Agent's authority may be expressed or implied 520 Express authority . 520 187. Definitions of express and implied authority 520 Implied authority 521 Husband and wife .......... 521 188. Extent of agent's authority ........ 523 Extent of authority .......... 523 Construction of powers of attorney ...... 525 Authority to do every lawful thing necessary for the purpose . 526 Authority of counsel, attorney, and pleader .... 526 Authority of factor .......... 527 Authority of broker 527 Authority of auctioneer 528 Authority of shipmaster 529 189. Agent's authority in an emergency 532 Sub-agents. 190. When agent cannot delegate ........ 532 191. " Sub-agent" defined .......... 534 192. Representation of principal by sub-agent properly appointed . . 534 Agent's responsibility for sub-agent 534 Sub-agent's responsibility ......... 534 193. Agent's responsibility for sub-agent appointed without authority . 535 194. Relation betiveen principal and person duly appointed by agent to act in business of agency ........ 536 195. Agent's duty in naming such person ....... 537 Ratification. 196. Right of person as to acts done for him without his authority . 537 Effect of ratification. Conditions of ratification ........ 537 Retrospective effect ......... 539 What acts cannot be ratified 540 Agents of Government ....,..,. 540 XXIV TABLE OF CONTENTS. SECTIONS PAGE 197. Ratification may be expressed or implied 541 198. Knowledge requisite for valid ratification . . . . . . 541 199. Effect of ratifying unauthorised act forming part of a transaction. 542 200. Ratification of unauthorised act cannot injure third person . . 542 Revocation of Authority. 201. Termination of agency 543 Completion of business of agency ....... 544 Death of principal ........ . 544 Payment or act by attorney under power 544 202. Termination of agency, where agent has an interest in subject-matter 544 Authority coupled with interest 545 Indian authorities . . 546 Factors for sale of goods ........ 547 203. When principal may revoke agent's authority . . . . 547 What amounts to exercise of authority 547 204. Revocation where authority has been partly exercised . . . . 548 Authority partly exercised ........ 548 205. Compensation for revocation by principal or renunciation by agent 549 Compensation for revocation ........ 549 206. N 'otice of revocation or renunciation ...... 550 207. Revocation and renunciation may be expressed or implied . . . 550 208. When termination of agent's authority takes effect as to agent, and as to third persons 550 Time from which revocation operates 551 209. Agent's duty on termination of agency by principal's death or insanity - ... 551 210. Termination of sub-agent's autliority 552 Agent's Duty to Principal. 211. Agent's duty in conducting principal's business .... 552 Departure from instructions 553 Usage of trade 554 Usage of Bombay market ; pakki adat system . . . . 554 Usage of kacchi adat system in cotton business .... 555 212. Skill and diligence required from agent 555 Gratuitous agent 557 213. Agent's accounts 557 Agent's duty to account 557 214. Agent's duty to communicate with principal . . . . . 558 215. Right of principal when agent deals, on his own account, in business of agency without principal's consent ...... 558 216. Principal's right to benefit gained by agent dealing on his own account in business of agency ........ 560 Principal's rights to profits ........ 560 Forfeiture of commission ......... 561 Knowledge of principal 562 Unauthorised profits of agent ........ 562 Payments authorised by custom 562 Agreements against agent's duty void , , ... , . 563 TABLE OF CONTENTS. XXV 217. Agent's right of retainer out of sums received on principal 1 s account 564 Pakki adat 565 218. Agent's duty to pay sums received for principal . . . . . 566 Mode of payment .......... 566 Payments in respect of illegal transaction . . ... 566 219. When agent's remuneration becomes due ..... 567 Agent prevented from earning remuneration 568 220. Agent not entitled to remuneration for business misconducted . . 569 221. Agent's lien on principal's property . 570 Agent's lien 570 How far lien effective against third person 571 Lien of sub-agents 571 How lien lost or extinguished 572 Principal's Duty to Agent. 222. Agent to be indemnified against consequences of lawful acts . . 573 Limits of agent's indemnity 574 Costs of defending action ........ 575 223. Agent to be indemnified against consequences of acts done in good faith . . . 575 Unlawful acts '.......... 576 224. Non-liability of employer of agent to do a criminal act . . . 576 225. Compensation to agent for injury caused by principal's neglect . 577 Effect of Agency on Contracts ivith Third Persons. 226. Enforcement and consequences of agent's contracts . . . . 578 227. Principal how far bound when agent exceeds authority . . . 579 228. Principal not bound when excess of agent's authority is not separable ............ 580 229. Consequences of notice given to agent 580 230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal 584 Presumption of contract to the contrary ...... 584 Principle of the rule and exceptions 584 Contract to the contrary ...*.... 585 Agency coupled with interest ........ 587 Right of agent to sue for money paid by mistake . . . 588 Presumed exceptions : Foreign principal 588 Principal undisclosed 589 Principal not liable 590 Deed executed in agent's name ....... 591 Sovereign States as principals ........ 591 Negotiable instruments ........ 591 Defendant's rights where agent sues in own name . . . . 592 Effect of settlement with principal ...... 592 231. Rights of parties to a contract made by agent not disclosed . . 593 232. Performance of contract with agent supposed to be principal . . 593 Rights of undisclosed principal 593 Equities between agent and third party '.,.,. 595 XXVI TABLE OF CONTENTS. SECTIONS TACiK 233. Hight of person dealing with agent personally liable . . . 596 Creditor's election 596 234. Consequence of inducing agent or principal to act on belief that principal or agent will be held exclusively liable . . . 598 235. Liability of pretended agent ........ 598 Representation must be effective . . . . . . . 599 Measure of damages 599 236. Person falsely contracting as agent not entitled to performance . . 600 237. Liability of principal inducing belief that agent's unauthorised acts were authorised .......... 601 Ostensible authority . . . 601 Notice of excess of authority . . . . . . 603 238. Effect on agreement, of misrepresentation or fraud by agent . . 604 Course of employment ......... 604 Admission by agent .......... 607 Privilege from distress of goods in hands of agent . . . 608 Bribery of agent 609 Eight of principal to follow property into hands of third person . 610 Personal liability of agent to repay money received to principal's use 610 CHAPTER XI. OF PARTNERSHIP. 239. " Partnership " defined 612 " Firm" defined : . . . . 612 Definition and essentials of partnership 612 Co-ownership and partnership ....... 613 Profits 614 Sharing profits 615 Partnership and service . . . . . . . .617 The firm 617 Joint Hindu family firm ........ 619 240. Lender not a partner by advancing money for share of profits. . . 620 241. Property left in business by retiring partner, or deceased partner's representative ........... 622 242. Servant or agent remunerated by share of profits not a partner . . 622 243. Widow or child of deceased partner receiving annuity out of profits not a partner ........... 622 244. Person receiving portion of profits for sale of goodwill not a partner 622 245. Responsibility of person leading another to believe him a partner . 623 Holding out 623 Proof of holding out 624 246. Liability of person permitting himself to be represented as a partner 625 Holding out by acquiescence 625 Not applicable to torts ......... 626 Estoppel distinct in kind from actual authority .... 626 247. Minor partner not personally liable, but his share is . . . . 627 Difference from English law as to minor partners . . . 627 Hindu minor's ancestral trade 627 TABLE OF CONTENTS. XXV11 SECTIONS PAGE 248. Liability of minor partner on attaining majority . . . 628 249. Partner's liability for debts of "partnership ..... 628 Nature of partnership liabilities ....... 628 250. Partner's liability to third person for neglect or fraud of co-partner 630 Ground of liability : usage of firm, how material . . . 630 251. Partner's power to bind co-partners 632 Question as to necessity ......... 632 General presumptions of authority in partnership att'airs . . 633 Admissions by partners ......... 635 Notice to partner ..'....... 635 Authority in particular transactions . . . . . 635 Exception : restriction of authority ...... 636 252. Annulment of contract defining partners' rights and obligations . 638 Variations by consent ......... 638 253. Hides determining partners' mutual relations, where no contract to contrary ......... ... 638 Sub-s. (1) Partnership property . . . . .' 640 Goodwill 640 Assets : benefit of contracts ..... 641 Partner's share 641 (2) Share in profits and losses . . . . . 642 Partner's right to indemnity and contribution . . 643 (3) (4) Eight and duty of partners to attend to business . . 643 (5) Power of majority 643 (6) New partners : assignment of share . . . 644 (7) Dissolution of firm ... . . . . . 645 (8) Partnership at will : tacit dissolution . . . . 645 (9) Expulsion 645 (10) Dissolution by death . . ... . . . 645 Custody of books 646 254. When Court may dissolve partnership . . . . . . 646 Sub.-s. (3) Transfer of partner's share by operation of law . . 647 (5) Gross misconduct 647 (6) Business carried on at a loss 647 Rescission for fraud .......... 647 255. Dissolution of partnership by prohibition of business . . . 648 256. Rights and obligations of partners in partnership continued after expiry of term for which it was entered into . . ... 648 257. General duties of partners ........ 649 258. Account to firm of benefit derived from transaction affecting partnership . . . . . . . . . . 649 259. Obligations to firm of partner carrying on competing business . 650 260. Revocation of continuing guarantee by change in firm . . . 651 261. Non-liability of deceased partner's estate for subsequent obligations 651 262. Payment of partnership debts, and of separate debts . . . 652 263. Continuance of partners' rights and obligations after dissolution . 653 Suit by surviving partner for debts to firm 654 Use of partnership name ........ 654 Duties between continuing and outgoing partners , . . . 655 XXV111 TABLE OF CONTENTS. 264. Notice of dissolution 656 What notice required ......... 656 265. Winding up by Court on dissolution or after termination . . 657 Amendment 657 Old section 657 Suit for account 658 Appointment of receiver 659 Beceivers iu Indian practice 660 Limitation period for a suit for dissolution ..... 660 Costs in a suit for dissolution 661 Form of plaint in a suit for dissolution 661 266. Limited liability partnerships, incorporated partnerships and joint stock companies 661 Schedule : Enactments repealed 662 Appendix : Sale of Goods Act, 1893 663 Partnership Act, 1890 687 Index 703 TABLE OF CASES. PAGE AAS v. Benham 650 Abaji Sitaram r. Trimbak Muni- cipality 25,121, 273,282 Abbakke Heggadthi r. Kin- hiamma Shetty 327,333,338 Abbott, Exparte 608 Abbott r. Wolsey 376 Abdool Hakim r. Doorga Proshad 136 Abdool Hoosein v. Goolam Hoosein 267 Abdul r. Hussenbi 124 Abdul Aziz r. Appayasami 10 Abdul Ganit'. Nandlal 296, 326, 328, 330 Abdul Hassan Khan r. Rangi Lai 514 Abdulla r. Mammod 118 Abdulla Khan i\ Girdhari 101 Abel r. Button 521 Acatos r. Burns 531, 532 Acchhan Bibi v. Sakina 81 Acebal r. Levy 374 Achal Ram v. Kazim Husain Khan 134, 137 Ackermann v. Ehrensperger 443 Adaikkalam Chetti r.iMarimuthu 235 Adamson r. Jarvis 231 Addison v. Gandasequi 597 Administrator-General of Bengal r. Juggeswar Roy 161 Advocate-General of Bengal v. Ranee Surnomoye Dossee ... 2 Agace, EJR parte 635 Agacio r. Forbes 587 Aga Gulam Husain r. A. D. Sasoon 233,236 Aghore Nauth Bannerjee r. The Calcutta Tramways Co.... 176, 198 Agius r. G. W. Colliery Co '308, 313, 441, 479 Agnew v. Indian Carrying Co.... 557 Agra Bank v. Hamlin 35 Agra Bank's Claim 505 Agra and Masterman's Bank, Re, Ex parte Asiatic Banking Corporation 46 Agricultural Cattle Insurance Co. v. Fitzgerald 268 Ahinsa Bibi v, Abdul Kader...233, 234 Ahmedabad Jubilee S. and W. Co. r. Chhotalal 157, 158 Ahmedabad Municipality r. Sule- manji 283 Ahmedbhai r. Framji 631 Ahmedbhoy Hubibhoy v. Vullee- bhoy Cassumbhoy 135 PAGE Ah Shain Shoke r. Moothia Chetty 42 Airey v. Borham 643 Ajudhia Prasad r. Bakar Sajjad 288, 298 v. Lalman 182 Alagappa Chetti r. Vellian Chetti 233 Alamai v. Positive Government Security Life Assurance Co. 181, 193 Aldridge r. Johnson 344, 362, 368 Alice Mary Hill c. Clark 127, 128, 144, 146, 157 Ali Saheb r. Shabji 7 Alia Baksh r. Chunia 126 Allcard v. Skinner 75, 77, 87 v . Walker 109 Alliance Bank r. Brown 22 Allkins r. Jupe 576 Allumuddy v. Brahan 522 Ambler v. Bolton 641 Amir Chand v. Ram 141 Amir Khan v. Amir Jan 131 Amir Khan v. Saif Ali 279 Anant r. Gopal 645 Anant Das v. Ashburner & Co... 174 Anant Ram v. Channu Lai 620 Ancona v. Marks 539 r. Rogers 377 Anderson v. Morice 370 v. Sanderson 607 Andrews v. Belfield 197 - v. Ramsey 569 Anglo-Egyptian Navigation Co. v. Rennie 357 Angus v. Maclachlan 573 Annaji Rou v. Ragubai 7 Annamalai Chetty r. Veerabad- ram Chetty 330, 331, 332 Annoda Mohun Rai t: Bhuban Mohini Debi 68,81 Annoda Persad v. Dwarkanath 557 Antrobus v. Wickens 568 Anupchand Hemchand v. Champsi Ugerchand 190 Appa Pillai r. Ranga Pillai 155 Appa Rao r. Suryaprakasa Rao 158, 159 Appa Rau r. Suryanarayana ... 332 Appleby v. Myers 279, 284 Argos, Cargo ex 499 Arjan Bibi v. Asgar Ali. ..330, 336, 337 Arkansas Smelting Co. v. Belden Co 206 Arlapa Nayak r. Narsi Keshavji 580 XXX TABLE OP CASES. PAGE Anuitage r. Insole 239 Armstrong r. Stokes 588, 594 Arthur r. Barton 529, 5:50 Arulu Mastry r. Wakuthu Chiu- nayen 330 Arunachellam Chetti r. Subra- manain Chetti 442 Aryodaya S. & W. Co. r. Javal- prasad 42 Asa Singh r. Sadda Singh 123 Asan Kani r. Somasundaram... 636 Ashgar Ali /. Delroos Banco Begum 81 Asiatic Banking Corporation, EJS 2>arte, Re Agra and Master- man's Bank 4(5 Atkinson r. Bell 355 r. Cotes worth 592 Atkyns r. Amber 592 Atlantic Mutual Insurance Co. V. Huth 531 Atmaram r. Hunar 286 : r. Umedram 267 Atool Chandra Mukerjee v. Shoshee Bhusan 508 Attorneys and Solicitors Act, He. 133 Attwood r. Munnings 525 Atwood r. Maude 647 Auchterlonie r. Charles Bill 171 August, The 529 Austin v. Manchester, etc., Ry. Co. 557 Australasia, Bank of, v. Breillat 634 Australasian Steam Navigation Co. v. Morse 531, 532 Australia, The 530 Ayerst v. Jenkins 115 Azemar r. Casella 419, 426 BABCOCK /.-. Lawson 510 Babshetti v. Venkataramana 106 Babu Ram v. Ram Dayal 544 Bachubai v. Shamji 641, 646 Backhouse r. Hall 651 Badeley r. Consolidated Bank 479, 621 Badr-un-nisa v. Muhammad Jan 300 Bagueley v. Hawley 421 Baid Nath Das r. Shamanand Das 330, 332 Baij Nath Singh r. Shah Ali Hosain 330. 334 Bai Kesserbai r. Narranji 508 Bailey r. Culverwell 349 Baillie's Case 69 Baily v. De Crespigny 253 Bain v. Fothergill 316, 317, 318 Bainbridge r. Firmstone 161 Baines r. Ewing 580 Baird's Case 634 Bai Somi v. Chokshi Ishvardas 449 Bai Vijli r. Nansa Nagar 127, 146 Baker r. Hedgecock 146 Balaram r. Southern Maratha Ry. Co 490 Baldeo v. Mul Chand 265 Baldeo Parshad v. Miller 179 Baldeo Sahai v. Jumma Kummar 140 Balfour r. Sea Fire Assurance... 299 PAGE Balkishan Das c. Madau Lai... 85, 104 Balkishen Das r. Run Bahadur Singh 329 Balkrishna /. Bank of Bengal 476, 477 c. Municipality of Mahad 233 Balkuraya r. Sankamma 335> Bama Sundari Dasi r. Adhar Chunder Sarkar 288, 298 Bamford v. Shuttleworth (51(1 Banda Ali r. Banspat Singh ...72, 152 Bani Muncharam r. Regina Stanger Add. Bank of Australasia r. Breillat 634 Bank of Bengal v. Fagan 521, 525, 602 r. Macleod ...51(5, ~>-~> r. Vyabhoy 'Gangji...l22, 147 Bank of New South Wales r. O'Connor 510 Bank of New South Wales r. Golburn Butter Factory ... 506 Banka Behary Dass r. Raj Kumar Dass 280 Banke Behari r. Sundar Lai 330 334, 335 Banku Behari Shaha v. Krishto Gobindo 67 Bannatyne v. Mel ver 605 Banner, Ex parte 367 Bannerman v. White 93 Banque Jacques - Cartier r. Banque d'epargne de Mon- treal 144 Bansi Dhar r. Akhay Ram 259 Bansidhar *\ Bu Ali Khan 335, 336, 337 Banwari Das v. Muhammad Mashiat 330 Barber, Ex parte, 638 v. Meyerstein 400 Barber Maran r. Ramana Goun- dan 215,234 Bardwell r. Lydall 260, 445 Baring r. Cowie 506, 527 v. Stanton 563, 567 Barker v. Windle 97 Barnard r. Faber 420 Barnes r. Youngs 645 Barnett r. South London Tram- ways 608 Barney, Jte 53(5 Barr r. Gibson 428, 429 Barrow r. Dyster 587 Barry v Longmore 507 Bar tlett r. Peutland 528 v. Purnell 528 Bartram r. Lloyd 609 Barwick r. English Joint Stock Bank 605 Basanta Kumar i: Kusum Kumar 508 Basavayya r. Subbaravu 330 Basdeo v. John Smidt 409 Basiruddin Mullick r. Surja Kuma Naik 630 Baskcomb r. Beckwith 100 Bassu Kuar v. Dhum Singh 288 Bateson /. Gosling 458 TABLE OF CASES. XXXI PAGE Baumwoll Mauufaotur r. Furness 530 Bawden r. London, etc., Asscc. Co 582 Beal v. South Devon Ry. Co. ... 557 Beall, EJ; parte -..571, 573 Bean land, Doe d., v. Hirst 268 Beasley r. Bignold 115 Seattle v. Lord Ebury 598, 599 Beaumont r. Boultbee 553 r.Reeve 157,158 Bechervaise -r. Lewis 473, 478 Bechuanaland Exploration Co. f. London Trading Bank ... 8 Beck v. Siddle 230 Beckett r. Addy tnan 450 Beckham r. Drake 204, 629 Bchari Lai r. Habiba Bibi 81 v. Parbhu Lai 575 v. Ram Ghulara 213 Behari Lall c. Jagodish Chunder 119 Behn r. Burness 93,249 Beier v. Chotalal Javerdas 53, 518, 554 Beldon r. Campbell 529 Bell r. Auldjo 528 - r. Balls 528, 533 Bellamy v. Debenham 42 Bemola v. Mohun 620, 636 Benares, Maharaja of, v. Har Narain Singh ; 260,443 Bengal, Administrator-General of, v. Juggeswar Roy 161 Bengal, Advocate-General, v. Ranee Surnomoye Dossee ... 2 Bengal, Bank of, v. Fagan 521, 525, 602 r. Macleod ...516, 525 v. Vyabhoy Gangji 122, 147 Bengal Coal Co. r. Homee Wadia & Co 35, 237 Beni Madho Das v. Kaunsal Kishor Dhusar 194 Benson r. Duncan 531 Berridge r. Berridge 481 Best r. Haji Muhammad 409 Bethell v. Clark 397, 399 Bettini r. Gye 218, 243 Betts v. Gibbins 576 Beulah Park Estate, Re 471 Bevan v. Waters 503 v. Webb 646, 649 Bexhill r. Christie 553 Bhaggu Lai v. De Gruyther 621 Bhagtidas v. Oliver 658 Bhagwan Das v. Bhajju Mai 122 Bhagwandas Narotamdas v. Kanji Deoji 240, 555 Bhagwat Dayal Singh v. Debi Dayal Sahu 133, 134, 137 Bhikabhai r. Bai Bhuri 449 Bhikanbhai r. Hiralal 118 Bhima v. Ningappa 151 Bhimbhat v. Yeshwantrao...83, 85, 162 Bhishambhar Nath r. Fatch Lai 620 Bhishambhar Nath r. Sheo Narain 620 Bhiwa Mahadshet r. Shivaram Mahadshet 151, 155 PAGE Bhojabhai f. Hayem Samuel 58 1 Bhola Nath i: Fateh Singh 331 r. Mul Chand ... 187, 566 Bholi Baksh r. Gulia 126 Bhut Nath Das r. Girish Chandra 658 Bhuvanagiri Subbarayudu r. Maradugula Venkataratnam 123 Bibee Solomon r. Abdool Azeez 106 Bichook Nath r. Ram Lochun ... 326 Bickerton v. Burrell 600 Biddle v. Bond 501 Biddomoye Dabee v. Sittaiam 415, 514 Biederman v. Stone 574 Biggs r. Gordon 567 v. Lawrence 607 Bilborough r. Holmes 262 Billings r. The Uncovenanted Service Bank 160 Biuda Knar r. Bhonda Das ...289, 297 Bindubashini Dassi r. Harendra Lai Roy 289 Binney v. Mutrie 642 Bir Bhaddar r. Sarju Prasad ... 597 Bird, Eseparte 610 v. Brown 399, 543 Birmingham Banking Co., Ex parte 533 Bishan Chand r. Radha Kishan Das 354 Bisheshar Das v. Govind Ram... 119 Bishop, Ex parte 574 r. Countess of Jeysey . . . 630 Blackburn i: Scholes 528, 544 '(. Vigors 583 Blackmore v. Bristol and Exeter Ry. Co 484,486 Blackwell & Co. r. Jones & Co. ... 20 Blades v. Free 551 Blair v. Bromley 630 Blakemore r. Bristol and Exeter Ry. Co 484,486 Blenkinsop v. Clayton 354 Bligh v. Davies 572 Blisset r. Daniel 645 Bloxam v. Handera 386 Blumberg v. Life Interests, etc., Corporation 524 Boistub Churn r. Wooma Chum 119 Boja Sellappa Reddy v. Vridha- chala Reddy 292 Bolton v. Lambert 539 v. L. and Y. Ry. Co. 383, 394 v. Salmon 455 Bolye Chund Sing v. Moulard ... 215 Bombay and Persia Steam Navi- gation Co. r. Rubattino Co. 256 Bombay Sawmills Co., Re 506, 571 Bombay United Merchants' Co. v. Doolubram 422, 427 Bonar r. Macdonald 452 Bond r. Gibson 632 Sonita, The 531 Bonner t\ Tottenham, etc., Build- ing Society 287, 288 Bonnewell v. Jenkins 43 Bonser v. Cox 453. 477 Boorman v. Brown 527 XXXll TABLE OF CASES. PAGE Boorman v. Nash 390 Borriesr. Imperial Ottoman Bank 596 Borrowman v. Free 221, 369 Boseck& Co. r. Maudlestan 493 Bostock v. Jardine 553 Bostock & Co. v. Nicholson & Sons 311, 433 Boston Fishing Co. v. Ansell 609 Boulton r. Jones 68, 294 Bourne, Re 653 Boursot r. Savage 583 Bowen r. Owen 212 Bowes, Re 505 v. Shand 251 Boyle Chund Sing v. Moulard ... 215 Brabant & Co. r. King 487 Bradburn r. G. W. By. Co 315 Bradbury v. Morgan 450 Bradford v. Williams 243 Bradley r. Riches 583 Brady r. Todd 523, 524 Brahmaputra Tea Co., Ltd., r. Scarth 165, 166, 323 Braithwaitet). Foreign Hardwood Co 435,437 Bramwell r. Spiller 588 Brandao r. Barnett 505, 506 Brandon v. Scott 500 Brandt v. Lawrence 213 Brandt's Sons & Co. v. Dunlop Rubber Co., Ltd 373 Branson v. Appasami 286, 298 Braunstein v. Accidental Death Insurance 197 Bray r. Chandler 568 Bridges r. Garrett 484, 524 Bright, Exparte 347, 519 Brij Bhukhan v. Sami-ud-din 324, 330 Brij Coomaree v. Salamander Fire Insurance Co 351 Brinkman v. Abdul Ghafur 126 Bristow r. Taylor 550 British Columbia Sawmill Co. v. Nettleship 307, 607 British Mutual Bank r. Charn- wood Forest Ry . Co 605 British Waggon Co. v. Lea & Co. 224 Broad v. Thomas 567 Broad bent v. Led ward 500 Brogden v. Metrop. Ry.Co....27, 43, 50 Brohmo Dutt . Dharmo Das Ghose 275 Brojendra Nath v. Sreemutty Luckey Money 78 Brojendro Kumar Roy v. Rash Behari Roy 232 Brook r. Hook 540 Brooks r. Hassall 524 Broom r. Hall 575 Brown v. Andrew 519 v. Arundell 608 r. Byrne 9 r. DeTastet 655 v. Edgington 428 K. Muller 306, 436 -r Powell Duff rynCoal Co. 531 v. Staton .... 529 PAGE Bryans v. Nix 507, 570 Bryant r. La Banque du Peuple 525 i: Quebec Bank 602 Buchanan v. Avdall 363, 408, 409 v. Findlay 570 Buldeo Doss v. Howe 252, 408 Bulkley v. Wilford 95 Bullen v. Sharp 615, 616 Buller v. Harrison 610 Bunarsee Dass v. Gholam Hoosein 635 Bunney v. Poyntz 382, 383, 393 Bura v. Mailia Shah 320 Burchell . Wilde 641, 655 Burden, Ex parte 341 Burden r. Barkus 643 Burgess A Burgess 618 r. Eve 448 Borgon r. Sharpe 531 Burla Ranga Reddi r. Kalapalli Sithaya 173 Borland r. Earle 562 Burn v. Brown 507 Burnard r. Haggis 494 Boron r. Denman 540 Butchart v. Dresser 654 Byrne r. Reid 644 r. Van Tienhoven 31 CAHILL r. Dawson 537, 572 Cahn v. Pockett's Bristol, etc., Co 395, 414 Calder v. Dobell 586, 597 Gal vert v. London Dock Co.... 467, 468 Calye's Case 491 Campanari v. Woodburn 551 Campbell v. Hassel 527 Canning r. Farquhar 42 Cape Breton Co., Re 562 Cargo ex Argots 499 Carl ill v. Carbolic Smoke Ball Co 47, 181 Carlisles, Nephews & Co. r. Rick- nauth Bucktearmull 168 Carmichael r. Evans 645 Carmichael's Case 545, 546 Carr r. Jackson 590 Garrison v. Rodrigues 526 Carter, Re 572 v. Agra Bank 179 r. Wake 512 v. Whalley 626 Gary r. Webster 610 Casey's Patents, Re 20 Cassaboglou v. Gibbs 393, 518 Castle V. Playford 370 v. Sworder 379 Catterall v. Hindle 512 Caver. Cave 583 Cawnpore, Collector of, r. Kedari 301 Cella, The 573 Chabildas Lalloobhai r. Dayal Mowji 581 Chadma Lai r. Kishen Lai 122 Chait Ram v. Mussammat Nathi 124 Chalamayya v. Veradayya 620 Chalmers, Ex parte 223, 389, 390 TABLE OF CASES. XXX111 PAP,E Chamberlain v. Williamson 204 Chambers v. Gold thorpe 176 Champernown v. Scott 508 Champsey v. Gill & Co 186 Chandra Mai v. Gonda Singh ... 504 Chandraprasad v. Varajlal 159 Chandulal Suklal v. Sidhruthrai Soojanrai 192, 555 Chanter v. Hopkins 419, 429 Chapman v. Withers 351, 353 Charlesworth v. Mac Donald 166 Charter v. Trevelyan 559 Chartered Bank of India, etc. v. Henderson 403 Chase r. West more 504 Chairing r. Whitchurch 86 Chatur Jagsi v. Tulsi 159 Chedambara Chetty v. Renja Krishna Muthu 85, 133 Chedi Lai r. Bhagwan Das 296 Ched worth v. Edwards 557 Chekkar. Gajiila 187, 575 Chelapathi v. Surayya 553 Chenvirappa r. Puttappa 280 Cherukomen v. Ismala 124 Chhitar Mai v. Jagan Nath Prasad 58 Chidambaram Chetti r. Pickappa Chetti 558 Chidambaram Chettiar r. Tinne- velly Sugar Mills Co 573 Chimman Singh r. Subran Kuar 122 Chinna r. Pedda 324, 336 Chinnaramanuja Ayyangar v. Padmanabha Pillaiyan 215, 591, 636 Chinnasamy r. Rathnasabapathy 289 Chinnaya v. Ramayya 17, 18, 19 Chinnock v. Marchioness of Ely 41 Choutmull v. Rivers Steam Navigation Co 491 Chowksi Himutlal c. Chowksi Achrutlal 159 Christacharlu v. Karibasayya 269, 270 Chuhar Mai r. Mir 335 Chummun Khan v. Mody 516 Chundee Churn v. Eduljee 656 Chunder Gaunt Mookerjee v. Jodoonath Khan 211 Chunia r. Kundan Lai 288 Chunni Kuar v. Rup Singh ...84, 104, 135 Citizens' Life Assurance Co. v. Brown 605, 606, 631, 632 City Discount Co. v. McLean 258, 259 Civil Service Co-operative Society v. General Steam Navigation Co 284 Clack v. Wood 567 Claridge r. South Staffordshire Tramway Co 493 Clark v. Leach 648 Clarke v. Bisley 465 v. Dickson 277 i: Hutchins 381 - v. Spence 356 v. Tipping 559 I.C. PAGE Clarke v. Watson 197 Clayv. Yates 346 Clayton's Case 258, 630 Clegg r. Edmondson 650 Clements v. Norris 644 Clerk v. Laurie 545, 546 Clifford v. Timms 645 Clive Jute Mills Co. v, Ebrahim Arab 362, 409 Close v. Close 458 Clough v. L. and N.-W. Ry. Co. 90, 277 Cobequid Marine Insurance Co. v. Barteaux , 531 Cochrane c. Moore 349 . v. Willis 105 Cockran r. Irlam 527, 528, 533 Coggs v. Bernard 484, 487 Cohen v. Cassim Nana 306 v. Sutherland . . 44 Cole v. North- Western Bank.. .413, 414 Coles v. Pack 443,447 v. Trecothick 533 Collector of Cawnpore v. Kedari 301 Collector of Masulipatam v. Cavaly Vencata 540 Collen v. Wright 598 Collins r. Barker 659 v. Evans .. , 576 Colonial Bank v. Cady 610 v. Exchange Bank 588 Colvin v. Hartwell 507 v. Newberry 530 Commercial Bank of Tasmania v. Jones 262, 458 Conquest v. Ebbetts 318 Consolidated Co. v. Curtis & Son 587 Const v. Harris 644, 659 Cook v. Collingridge 641 Cooke v. Addison 495 v. Eshelby 597 v. Oxley 34 v.Wilson 587 Coope v, Twynam 481 Cooper, Exparte 382, 396 v.Joel 442 v. London and Brighton Ry. Co 339 t-. Phibbs 110 - v. Willomatt 494 Cooverji v. Bhimji 176 Coppin r. Walker 592 Corbett, Ex parte 617 Coringa Oil Co., Ltd. r. Koegler 173, 176 Cornfootv. Fowke 606 Cornwall v. Henson 435 Cort v. Ambcrgate Ry. Co 435 Cory Brothers & Co. v. Owners of the Mecca 259 Costa Rica Ry. Co. v. Forwood 561 Coulthart v. Clementson 450 Coupe" Co. r. Maddick 492 Court v. Berlin 629 Couturier v. Hastie 105, 519 Coventry v. Barclay 638 Cowan v. Milbourn... 115 XXXIV TABLE OF CASES. Cowasjee v. Lallbhoy 647 r. Thompson 392 Cowell . Simpson 508, 573 Cox r. Bishop Cotton's Schools, Governors of 10 v. Bruce 531 . Hickman ...615,616,621,622 r. Prentice 610 v. Willoughby 648 Cragoe v. Jones 458 Crawley r. Luchmee Ram 175 Crawshay r. Collins 655 Craythorne v. Swinburne 470, 473, 481 Creet . Seth 455 Cropper v. Cook 527 Croydon Gas Co. t. Dickinson... 454 Cullianji Sangjibhoy -. Raghowji Vigpal 565 Cumber *>. Wane 272 Cundy v. Lindsay 69, 89 Cunliffe v. Blackburn Building Society 571 v. Harrison 435 Cunningham & Co., Re 633 Curl Brothers v. Webster 641 Currie v. Rennick 95, 102 Curtice v. London City and Mid- land Bank 38 Curtis v. Williamson 597 Curwen v. Milburn 573 Cusack v. Robinson 388 Cutter v. Powell 216, 567 DADA v. Babaji 5 Dadabhai v. Salleman 385 Dadabhoy v. Pestonji 151 Dady v. Madhuram 185 Dagdu v, Bhana 66 Dakhina Mohan Roy r. Saroda Mohan Roy 289 Dalsukhram v. de Bretton 132 Damodar v. Atmaram 516 Damodar Das v. Muhammad Husain 463, 466 v. Sheoram Das 560, 562 Damodara Mudaliar v. Secretary of State for India ...291, 295, 298 Danby v. Coutts 525 Daniels. Adams 529 Danks, Ex parte 212 D'Arcy v. Tamar Ry. Co 519 Dargavarapu v. Rampratapu 265 Darnley v. L. C. & D. Ry. Co. ... 264 Dasaundi v. Iman-ud-Din 344 Datoobhoy Hassum v. Vallu Mahomed 635 Dattaram r. Vinayak 56. 57, 276 Datubhai v. Abubaker 339 Daula v. Gonda ^ 159 Davenport r. Reg 258 David and Matthews, Re 640, 641, 655 Davidson v. Cooper 266, 268 v. Donaldson 597 Davies, Ex parte 501 PAGE Davies v. Burnett 345 v. Humphreys 480 v. London and Provincial Marine Insurance Co. 475 Davis r. Cundasami Mudali ...273, 275 v. Davis 640 v. Hedges 432 v. Howard 574 r. Richardson 610 Davlatsing v. Pandu 147 Davy r. Scarth 660 Da wood r. Vullubhdas 7 Day v. Singleton 317, 318 Dayabhai Dipchand t\ Dullabhram Dayaram 208, 213 v. Maniklal Vrijbhukan213, 245 Dayabhai Tribhovandas v. Lakh- michand Panachand 181, 187, 188, 279 Dayal v. Khatav 658, 661 Dean v. Macdowell 650 Debendra Nath Dutt v. Adm.- Gen. of Bengal 107, 446. 475 Debenham r. Mellon 521, 522, 523 Debi Dfts v. Nirpat 235 Debi Doyal Sahoo v. Thakurai Bhau Pertap 137 Debi Prasad r. Rup Ram 118 Debi Sahai v. Ganeshi Lai 187 De Bussche v. Alt 533, 534, 53(5 De Comas v. Prost 546, 547 Degamber v. Kallynath 558 De la Bere v. Pearson, Ltd. ...161, 309 De la Chaumette v. Bank of England 571 Delhasse, Ex parte 621 Delhi and London Bank v. Hunter 476 Deno Nath r. Nibaran Chandra 323, 326, 327, 330 Dent v. Bennett 75 Oenton v. G. N. Ry. Co 46 Denton's Estate, Re 481 Deojit v. Pitambar 179 Dering v. Earl of Winchilsea ... 480 Derry v. Peek 92,94 Desai Himatsingji r. Bhavabhai 288, 296, 297 Deslandes i: Gregory 586 Devaynes v. Noble 652 Devlatsing . Pandu 257 Dhallu r. Jiwan Singh 135 Dhanipal Das v. Maneshar Bakhsh Singh 85, 87, 104 Dhan Mull v. Ram Chunder 59 Dhanukdhari v. Nathima 144 Dhiraj Kuarv. Bikramaj it Singh 128, 157 Dholidas v. Fulchand 140, 142 Dhondbhat v. Atmaram 13 Dhondiba r. Ramechandra 369 Dhondu v, Narayan 6 Dhuramsey v. Ahmedbhai 280 Dibbins r. Dibbins 538 Dicas v. Stockley 572 TABLE OF CASES. XXXV PAGE Dick v. Dhunji Jaitha ...227, 228, 230 Dickinson r. Dodds 37, 38 r. Valpy 623 Dilbar Sarkar r. Joysri Kurmi 323, 338 Dingle r. Hare 527 Dip Narain Eai v. Dipan Kai ... 332 Dixon, Ex parte 627 (-.Baldwin 395 r. Clarke 211 v. London Small Arms Co. 316 v. Stansfield 507 v. Winch 583 - r. Yates 350, 383, 391, 400 Dodson r. Downey 644 Doe d. Beanland r. Hirst 268 Dogdu v. Bhana 66 Donald v. Suckling 494 Doolubdass Pettamberdass v. Ramloll Thackoorseydass ... 180 Dorab Ally f. Executors of Kha- jah Mohecoodeen 421 Dorabji r. Muncherji 485 Dorasinga v. Arunachalam 238 Doshi Talakshi r. Shah LJjamsi Velsi 182, 183, 185, 187, 191, 193, 194 Douglas, lie 573 Douglas Norman & Co., lie 508 Dowlat Ram r. Jiwari Mai 512 Downham r. Williams .; 585 Dowse v. Gorton 652 Dresser r. Noswood 581 Drew v. Nunn 543 Drinkwater r. Goodwin. ..507, 527,592 Drummond r. Van Ingen 419, 424 Dugdale r. Levering 438 Dular Chand r. Balram Das 233 Dulari r. A r allabhdas Pragji 140 Dulichand r. Ramkishen Singh 301 Dullabhdas v. Lakshmandas 326, 334, 335 Duncan r. Hill 574 Duncan Fox & Co. v. North and South Wales Bank 471 Dunmore, Countess of, r. Alex- ander 33 Dunn r. Bucknall Bros 305 v. Macdonald 599 Dunne i\ English 562 Durga r. Raghu 658, 661 Durga Bakhsh Singh r. Mirza Muhammad Ali Beg 61 Durga Prasad r. Baldeo 14, 157 Durga Prasad Sureka r. Bhajan LallLohea 351 Durham, Mayor of, v. Fowler ... 468 Dutton v. Marsh 586 v. Poole 16, 17, 18 v. Solomonson 364, 380 Dyer r. Hargi ave 100 EAGLETON r. East India Ry. Co. 501 East India Co. v. Oditchurn 175 r. Tritton 611 East Indian Ry. Co. r. Bunyad Ali... 490 r. Kalidas 483 Eastgate, lie, Ex parte Ward ... 436 PAGE Eastwood v. Kenyon 158 Edan v. Dudfield 380 Ede v. Kauto Nath Shaw 265 Edelstein r. Schuler & Co 8 Edgar r. Fowler 548 Edgington r. Fitzmaurice 90 Edmunds r. Bushell 524, 601 v _ Wallingford 287 Edwards, EJC parte 572, 611 t-. Brewer 392 v. Havill 530 v. Hodding 610 Egerton r. Lord Brownlow 564 Eichholz r. Bannister 421 Elbinger Actien-Gesellschaft v. Armstrong 303 Elbinger Actien-Gesellschaft v. Claye .- 588 Eley v. Positive Government Security Life Insurance Co. 158 Elias r. Govind 568 Eliason v. Henshaw 44 Ellen r.Topp 285 Ellershaw . Magniac 365 Elliott r. Crutchley 254, 284 f. Thomas 383 Ellis f. Emanuel 444 v. Goulton 610 r. Pond 574 v. Thompson 607 Elmore v. Stone 375 Elphick v. Barnes 197, 351, 352 Elphinstone, Lord, r. Monkland Iron and Coal Co 323 Emmerson r. Heelis 437, 528 Emmerton r. Matthews 422 E m press c. Joggessur Mochi 344 Empress Engineering Co., Re 538, 590 Empress of India Cotton Mills Co. v. Naffer Chunder Roy 340 Engell v. Fitch 310, 316, 317 England v. Curling 638 v. Davidson 152 r. Marsden 287 Esdaile f. La Nauze 526 Eshahug Molla r. Abdul Bari Haldar 212 Eshan Kishor v. Haris Chandra 123 Eshoor Doss v. Venkatasubba Rau 182, 185, 191, 192 Esposito r. Bowden 129 Etwaria v. Chandra Nath 58 European and Australian Royal Mail Co. r. Royal Mail Steam Packet Co 501 European Bank, lie 610 Evans v. Brembridge 477 v. Coventry 659 v. Edmonds 89 Ewan v. Smith 418 FAIRI.IE r. Fenton 586 Fairf Ahmad r. King Emperor .. 416 Fakirchand Lalchand r. Doolub Govindji 555 Falckv. Williams 65. 70 Fanny, The 531 c 2 XXXVI TABLE OF CASES. PAGE Farina v. Home 379, 405, 418 Farquharson r. King 610 Farrant v. Barnes 486 Farrer r. Lacy 529 Farrow v. Wilson 203 Fateh Singh v. Sanwal Singh ... 121 Fatesingji v. The Secretary of State for India 441 Fatima v. Debnauth 55 Fatima Khatoon v. Mahomed ... 300 Fatmabai v. Pirbhai 234 Fazal Husain v. Jiwan Ali 259 Featherston r. Wilkinson 304 Featherstonhaugh r. Fenwick 618, 649 Feiser. Wray 392, 393 Felthouse r. Bindley 27, 45 Fenn v. Bittleston 494 r. Harrison ..* 524 Fenwick, Re 583 Feretr. Hill 90 Ferguson v. Um Chand Boid ... 526 Ferrand v. Bischoffsheim 595 Ferrers r. Robins 553 Field r. Lelean 388 Filby r. Hounsell 41 Findon r. McLaren 608 Fine Cotton Spinners', etc., Asso- ciation r. Harwood 619 Fink r. Buldeo Dass 544 Finlay v . Chirney 204 Firbank v. Humphreys 599 Fischem Kamala Naicker 133 Fisher r. Apollinaris Co 131 v. Bridges 116 r. Cutbell 543 r. Drewitt 568 v. Marsh 587 r. Smith 572 Fitzherbeit j-. Mather 582 Fitzroy Steel Co., He 583 Fleming r. Bank of New Zealand 539 r. Koegler 249 Flemyng r. Hector 616 Foakes v. Beer 272 Forbes v. Jackson 472 Ford r. Stier 70 r. Titley 435 Foreman r. Great Western Ry. Co. 520 Forth v. Simpson 573 Foster v. Dawber 272 v. Mackinnon 65, 66 Fowkes r. Manchester and Lon- don Assurance Association 63 Fox v. Clifton 624 Fragano r. Long 362 Framji v. Hormasji 421 r. McGregor 415 Frampton, Ex parte 526 Fraser & Co. v. Bombay Ice Manufacturing Co.. ..167, 168, 169 Fray r. Voules : 527 Frazer p. Jordan 465 v. Marsh 530 Freeman r. East India Co 531 Freeth v. Burr... 21 7, 218, 244, 250, 435 French v. Howie 597 r. Styring 614 , PAGE Friend r. Young 652 Frith r. Forbes 507 r. Frith 545 Frixione v, Tagliaf erro 575 Frost v. Aylesbury Dairy Co. 423, 428 v. Knight 221,435 v. Oliver 530 Fry r. Lane 79 Fuentes r. Montis 401, 413 Full wood v. Akerman 567 Furnival r. Coombes 590 Futteh Ali v. Gunganath Roy ... 291 GABABRON v. Kreeft 355, 365, 368 Gadd r. Houghton 586, 589 Gadu Bibi r. Parsotam 635 Gaetano and Maria, The 529 Gandy i\ Gandy 20 Ganesh r. Yishnu 86 Ganesh Flour Mills Co. r. Puran Mai 538 Ganesh Ramchandra v. G. I. P. Ry. Co 223 Ganga Baksh r. Jagat Bahadur Singh 85 Ganga Bishun Singh r. Mahomed Jan Ganga Dayal r. Bachchu Lai ... Ganga Prasad v. Ram Dayal ... Ganga Ram r. Chandan Singh... i. Devi Das 258 331 158 269, 270 138, 152 Gangadas v. Jogendra 292 Gangadhar r. Damodar 119 Ganges Manufacturing Co., Ltd., v. Indra Chand 173 Ganges Steam Car Co 597 Ganpat r. Adarji 7 r. Annaji 619.044 Gardiner v. Gray 424, 425 Gardner r. Baillie 526 r. Walsh 266 Garland v. Jacomb 638 Garner r. Murray 642, 643 Garth i: Howard 608 Garwood's Trusts, In re 644 Gaurinath Mookerjee v. Mad- humani Peshakar 126 Gaussen r. Morton 545 Geare v. Mare 116 Geipel v. Smith 130 General Billposti ng Co. v. Atkinson 218 General Share Trust Co. r. Chap- man 508 George r. Clagett 595 George Whitechurch, Ltd., v. Cavanagh 68 Geresh Chunder v. Bhuggobutty 81 German Mining Co.'s Case 643 Ghanshiam Singh v. Daulat Singh 319 Gibbes, Ex parte 399 Gibbon v. Pease 346 Gibbs r. Grey 531 Giblin v. McMullen 487, 557 Gibson v. Carruthers 391 r. Crick 568 TABLE OF CASES. XXXV11 PAGE Gibson r. May 570 r. Winter 592 Gidley r. Lord Palmerston 591 Gieve, Re 182, 185, 186 Giles r. Edwards 247 Gillespie Brothers & Co. v. Cheney, Eggar & Co 429 Gillett r. Thornton 648 Gilman r. Elton 608 Gilmour r. Supple 358 Girdhari Lai r. Crawford 521 Girijanund r. Sailajanund ...143, 151 Girisli Chandra r. Kunja Behari 309 Gii-raj Baksh v. Kazi Hamid AH 283 Gladstone v. King 582 Glassington r. Thwaites 650 Gloucester Municipal Election Petition 36 Gluckstein t. Barnes 562 Glyn Mills Co. r. East and West India Dock Co 400 Glynn v. Margetson 52 Gnanabhai r. Srinivasa Pillai ... 125 Gnanasainbanda Pandara San- nadhi . Vela Pandaram ... 143 Gobardhan Das r. Jai Kishen Das 72, 79, 132 Goberdhan Singh v. Ritu Roy ... 280 Gobind Chunder r. Srigo-bind... 232 Gobind Chunder Sein r. Ryan... 515 Gobind Das r. Sarju Das Add. Gobind Prasad v. Chandar Sekhar 235 Gocuklas i: Lakhmidas 136 Goculdas Madhavje r. Narsu Yenkuji 255 Godin v. London Assurance Co. 573 Godts v. Rose 350. 367, 376 Godwin r. Francis 599 Gogun Chunder Ghose r. Dhuro- nidhur 267, 270 Gokal Chund r. Khwaja Ali 336 Golding, Davis & Co., Ex part e 401, 402 Golla Nagabhusanam v. Ka kala 658 Gomez, Ex parte... 570 Good, Ex parte 232, 467 Goode K. Harrison 627,628 Goodson v. Brooke 528 r. Grierson 151 Goodwin v. Robarts 603 Gooroo Doss Dutt v. Ooma Churn Roy 260 Gopal Daji v. Gopal Bin onu... 446 Gopal Das v. Hari Das 590 Gopal Ramchandra r. Gangaram 7, 135 Gopal Singh r. Bhawani Prasad 440, 451 Gopal Tukaram r. Sorabji Nusser- wanji 347 Gopalrav r. Kallappa 119, 146 Gopaludu v. Venkataratnam...326, 330 Gordhanlal r. Darbar Shri Suraj- malji 296 Gordon r. Street 103 PAGE Gosling v. Gaskell 537, 616 Gosvami Shri Purushotamji Maharaj r. Robb 120 Gough r. Everard 377 Gourchandra v. Protapchandra 464 Gour Chandra Das r. Prasanna Kumar Chandra 267, 268 Goverdhandas v. Bank of Bengal 473 Govind v. Pacheco 129 Govinda Kuar r. Lala Kishun Prosad 280 Govindasami r. Kuppusami 267 Govindasami Naidu v. Kuppu- sami Pillai 267 Govindji r. Lakmidas 59 Graff v. Evans 345 Grafton r. Armitage 346 Graham v. Campbell 309 Grant r. Gold Exploration, etc., Syndicate of British Columbia 559,609 r. Norway 531, 606 i-. Secretary of State for India 591 Grantham v. Hawley 372 Gravely v. Barnard 161 Gray i-. Gutteridge 610 r. Haig 558 v. Mathias 157 v. Seckham 471 Great Eastern, The 530, 603 Great India Peninsula Ry. Co. v. Hammandas...399, 405, 412, 418 Great Northern Ry. Co. v. Swaf- field 499 r. Witham 35 Greatrex v. Greatrex 646 Great Western Insurance Co. v. Cunliffe 563 Great Western Ry. Co. v. Willis 608 Grdbert-Borgnis v. Nugent 313 Green r. Bartlett 568 r. Baverstock 437 v. Briggs 614 r. Hopke 589 -. r. Lucas 568 r. Mules 567 v. Wynn 458 Greenwood v. Francis 464 v. Holquette 410, 414, 415,464 Grenon r. Lachmi Narain Augur- wala 240, 385 Grice r. Ken rick 592 r. Richardson 379, 388, 389 Grimoldby r. Wells 433 Grindley v. Barker 519 Groom r. Cheese wright 573 Grove r. Dubois 519 Gubhoy v. Avetoom 590 Guerreiro v. Peile 527 Guild & Co. r. Conrad 441 Gunn r. Bolckow, Vaughan & Co 387 r. Roberts 530 Gunput Narain Singh, Re 139 Gurney r.Womersley 611 XXXV111 TABLE OF CASES. PAGE Gursami Chetti v. Samurti Chinna 227 Gurusami r. Subbaraya 135 Outline r. Armstrong 519 Guyr. Churchill 133 HADLET-I-. Baxcndale ...307, 311, 312, 818 Hagedorn r. Oliverson 539 Hajarimal r. Krishnarav...444,456,459, 460, 461, 465, 466 Haji Abdul Rahman r. Haji Noor Mahomed 211 Haji Abdul Rahman Allarakhia r. The Bombay and Persia Steam Navigation Co. ...108, 111, 112 Haji Ismail Sait r. The Company of the Messageries Maritimes of France 490 Haji Mahomed v. Spinner 42, 45 Hakma Manji r. Meman Ayab...6, 335 Halbot r. Lens 599 Haldane v. Johnson 240 Haler. Hale 659, 660 Halima Bee r. Roshan Bee 296 Hall r. Capell 144 r. Hall 659 v. Warren 62 Hallett's Estate, Re 261, 498 Halliday r. Holgate 494 Hambro r. Burnard 579, 602 Hamburg, The 530 Hamidoolla r. Faizunnissa 124 Hamilton r. Watson 476 Hamlyn r. Houston & Co 631 r. Talisker Distillery ...10,131 r.Wood 549 Hammond r. Anderson... 359 Hammond & Co. r. Bussey ...308, 313, 441, 479 Hammonds v. Barclay 507 Hampden v. Walsh 181 Hanmant r. Jayarao 55 Hanson?'. Meyer 359 Harburg India-rubber Comb Co. r. Martin 441 Harding, Ex parte 478 Hare and O'More's Contract, lie 547 Harendra Lai Roy c. Uma Charan Ghosh 267 Havgreave r. Spink 411 Had r. Ramji 86, 331 Haribhai Mancklal r. Sharafali Isabji 164. 166, 169 Haridas r. Kalumull 409, 433 Harilal v. Nagar 7 Hari Lalu Patil v. Ramji Valad Pandu 86,331 Hari Saran Maitra i: Jotindra Mohan Lahiri 231 Harivalabhdas r. Bhai Jivanji...78, 135 Harjiban Das r. Bhagwan Das... 452 Harmanr. Johnson 630 Harmer r. Cornelius 556 Harrington v. Victoria Dock Co. 609 Harris r. Nickerson . 47 PAGE Harrison v. Delhi & London Bank 63 r. Luke 344 Harriss r. Fawcett 450 Hartas r. Ribbons 575 Hartley v. Ponsonby 152 Harvey r. Johnston 48 Hasha r. Ragho 657 Hash mat Ali r. Lachmi Narain 657 Haslam, lie 562 Hasonbhoy r. Clapham 589, 598 Hastelow r. Jackson 548 Hathesing r. Laing 572 Hawtayne v. Bourne 532, 633 Hay r. Goldsmidt 526 Hayman, Ex parte 625 Hazard r. Treadwell '... 603 Hazari v. Chunni Lai 459, 461, 466, 469 Head, Re 263, 629 r. Diggon 34 r. Tattersall 352, 353 Heald r. Kenworthy 594 Heath v. Chilton 566 r. Sansom 626,654 Heatley r. Newton 587 Heera Lall r. Dhunput Singh ... 160 Heffield r. Meadows 447 Heilbutt r. Hickson 424, 430, 432 Helme v. Smith 614 Hemendro Coomar Mullick r. Rajendrolall Moonshee 227 Hem Raj r. Khuda Bakhsh 86 Henderson r. Barnewell 528, 533 v. Stevenson 28 Henderson & Co. r. Williams ... 501 Henkel r. Pape 65 Henthorn v. Fraser 31, 32 Hermann r. Charlesworth 138 Het Narain r. Ram Deni 7 Het Ram r. Debi Prasad 443 Heyworth r. Hutchinson 431 Hibblewhite r. McMorine 374 Hickman r. Berens 106 Higgins r. Senior 586 Hill r. Clark.. ..127, 128, 144, 146, 157 Hilton v. Eckersley 170, 171 r. Tucker 378, 409 Hinde v. Liddell 303 r. Whitehouse..., , 359 Hindley's Case 39 Mine r. S. S. Ins. Syndicate.. .524, 528 Hingani Lai r. Mansa Ram 283 Hippisley r. Knee 569 Hira r. Bhandari 141 Hirada Karibassappah r. Gadiga Muddappa 261 Hoadly r. McLaine 374 Hoare r. Parker 516 r. Rennie 435 Hobson r. Bass 445 Hochster r. Dela Tour ...220, 221, 222, 435 Hodges r. Delhi and London Bank 82,464 Hodgson r. Loy 392 Hog? r. Snaith 526 Holding r. Elliott 586 Holland r. Russell .. ,610 TABLE OF CASES. XXXIX PA a n Hollis v. Claridge 571 Holme i: Brunskill 455, 456 v. Guppy 247 r. Hammond 616 Holt r. Ely 588 Honck r. Muller 244, 435, 637 Honda Mai v. Muhammad Baksh 327 Honeyman r. Marryatt 41 Hooper v. Keay 261 Hope, The 565 Hormasji v. Mankuvarbai 583 - r. Pestanji 119 Hornby r. Lacy 519 Home r. Midland By. Co 313 Horsfallt'. Thomas 102 Hosein Shah v. Nur Ahmed 131 Hoti Lai r. Mu Sammat 81 Hough r. Manzanos 586, 590 Houghton v. Matthews 507, 527 Houldsworth v. City of Glasgow Bank 605 Houlton's Case 652 Household Fire, etc., Insurance Co. v. Grant 32, 33 Hovenden v. Millhoff 609 How v. Kirchner 573 Howard v. Baillie 526 c. Lovegrove.... 441 v. Sheward 524 Howatson r. Webb 66 Howe?;. Smith 353 Howell v. Coupland 253 Howgate and Osborne's Contract 266 Hubbard, Ex -parts 509 Hubbersty r. Ward 531 Huddersfield Banking Co. v. Lister & Co 106 Hudson v. Buck 44 Hughes r. Greame 600 Huguenin v. Baseley 76, 470 Hulme r. Coles 463 Humble v. Hunter 206, 601 Humfrey v. Dale 9 Hunsraj Morarji v. Nathoo Gangaram 207 Hurmukhrai r. Narotamdass 182,185, 186,191 Hurrinath r. Krishna 558 Hurruck Chand r. Gobind Lai Khetry 631 Hurry r. Mangles 375 Husain Bakhsh r. Rabmit Husain 84, 135 Husaini Begam r. Khwaja Muhammad Khan 19 Hussey r. Christie 530 r. Horne-Payne 41, 42, 44 Hutcheson r. Eaton 586 Hutchins r. Scott 268 Hutley i: Hutley 133 Button v. Bullock 588 Hyder Ali v. Elahee Bux 614 Hydraulic Engineering Co. r. McHaffie 251, 307, 313 Hyman v. Nye 486 IBRAHIMBHAI r. Fletcher . . 354 PAGE Ichha Dhanji r. Natha 485 Imam-ud-din v. Liladhar 234 Imperial Bank v. London and St. Katherine's Docks Co. ...386, 394, 469 Imperial Banking and Trading Co. v. Atmaram Madhavji 244 r. Pranjivandas Harji- vandas 244, 245 Imperial Loan Co. r. Stone 59 Inayutullah v. Rani 445 Inchbald v. Western Neilgherry Coffee, etc., Co 550, 568 Inchmaree, The 529 Indar r. Khushli 122 Indar Singh r. Narindar Singh 5<> Inder Pershad Singh v. Campbell 255 India, The Secretary of State for, v. Abdul Kahim 320 r. Arathoon 197 v. Fernandes 293 v. Kamachee Boye 539, 540 v. Nilamekam 476 v. Sheo Singh 484 v. Sheth Jeshingbhai 106 Indian Chief, The 2 Indrau Ramaswami v. Anthappa Chettiar 56, 149,157 Ireland v. Livingstone 518, 523 v. Thomson 530 Irish, Re 660 Irrawaddy Flotilla Co. v. Bug- wandas I, 6, 8, 488, 489 Irvine r. Union Bank of Aus- tralia 538, 539 v. Watson 594 Isaack r. Clark 502 Isherwood v. Whitmore 214 Ishur Chunder r. Jibun Kumari 485 Ismal v. Daudbhai 197 Ismail Mussajee r. Hafix Boo ...79, 82 Iveson r. Conington 585 JACKSON r. Cummins 504 Jacobs v. Latour 573 v. Morris 525 Jadobram v. Bulloram 642 Jadu Nath Poddar r. Rup Lai Poddar 280 Jafar Ali r. Ahmed Ali 154 Jaffer Meher Ali r. Budge-Budge Jute Mills Co.. ..114, 122,206,207, 209, 390 Jafferbhoy r. Charles worth ...506, 547 Jagabhai v. Rustomji 546 Jagadindra Nath -v. Chandra Nath 150 Jaganadham i: Ragunadha 326 Jagannathdas v. Ramdas 526, 527 Jagapati r. Ekambara 527 Jagat Chunder v. Iswar Chunder 647 Jaggannath r. Secretary of State 69 Jag Lai v. Shib Lai 230 Jagmohundas r. Nusserwanji ... 304 Jaikissondas r. Zenabai 660 Jai Kumar r. Gauri Nath 133 Jalim Singh v. Secretary of State 491 xl TABLE OF CASKS. Jambu llamaswamy r. Sundaraja 461 James v. Griffin 394, 395 Jamsitji v. Kashinath 58 Jang Bahadur v. Shankar Rai ... 526 Janki Das v. Ahmad Husain 331 Janki Prasad Singh v. Baldeo Prasad 288,296 Janson r. Driefontein Consoli- dated Mines 129, 130 Jaques v. Millar 308, 316 Jarao Kumari v. Basanta Kumar Roy 294,296 Javali Ramasami r. Satham- bakam 657 Jebsen v. East and West India Dock Co 315 Jefferys r. Agra Bank 506 Jenkins r. Bethan 557 r. Hutchinson 585 Jenkyns r. Usborne 393 Jenner r. Smith 362, 363 Jennings i: Jennings 640 r. Rundall 59 Jhinguri r. Durga 122 Jivray Megji v. Poulton 245 Jiwan Vurjung r. Haji Osmaii 207, 390 Jogendra Mohan Sen r. Uma Nath Guha 258 Jogesh Chunder Dutt r. Kali Churn Dutt 301 Jogo Mohen Deb r. Davdoong Burman 126 Johnson r. Credit Lyonnais 413 r. Crowe 97 r. Raylton 427 Johnston r. Boyes ....46, 437 Johnstone r. Marks 58 Jones r. Arthur 215 v. Barkley 243 v. Bowden 91, 421 r. Bright 427 r. Daniel 41 v. Gardiner 317 v. Just 423, 426, 427, 428, 432 r. Littledale 585 v. Marshall 511 r. Merionethshire Building Society 72,130 r. Peppercorn 571 r. St. John's College 340 Jonmenjoy Coondoo r. Watson 515, 525 Joravermal Si vial r. Dadabhai Keramji 187 Jordon v. Ram Chandra Gupta... 568 Josephs. Solano 146 Joshi Kalidas v. Koli Dada 341 Josling r. Kingsford 425 Jowala Nath v. Rupa 233 Joyce v. Swaiin 367, 374 Joykisto r. Nittyanund 628 Joyner r. Weeks 315,319 Jugdeo Narain Singh v. Rajah Singh 300 Juggeewundas r. Ramdas 636 PAGE Juggernath Augurwallah v. Smith 363, 418 Juggernauth Sew Bux r. Ram Dyal 190, 194, 213 Juggessur v. Panchcowree 139 Juggomohun Ghose r. Kaisree- chund 51 v. Manick- chund 9, 51 Juggut Chunder r. Rada Nath ...644, 657 Jyarii Begam r. Umrav Begam... 296 Jyoti Kumar r. Hari Das 123 KAHN v. Alii Mahomed 660 Kalachand Kyal c. Shib Chunder 327, 330 Kalidas r. Nathu Bhagvan ...233, 234 Kaliprasad Tewari v. Rnga Sahib Prahlad Sen 154 Kali Prasanna r. Ambica Charan 464 Kamakshi Achari v. Appavu Pillai 195 Kamala Kant Ghose v. Kalu Mahomed 120 Kamalammal r. Peeru Meera Levvai Rowthen 319 Kamini v. Kaliprossunno Ghose 84 Kamisetti Subbiah v. Katha Ven- katasawmy 31 Kamta Prasad v. Sheo Gopal Lai 56, 57, 276 Kandhiya Lai r. Chandar 233 Kanhaya Lai r. Narain Das 336 Kanji v. Bhagwandas 240 Kanshi Ram v. Secretary of State for India 344 Kanthu Punja v. Vittamrna 236 Kan war Ranzar v. Hebbert 589 Karamali r. Narain Singh 267 Karampalli r. Thekku Vittil ... 274 Karim Bakhsh r. Bithul Das ... 445 A'ttrtifik, The 529 Kashiba v. Shripat ...54, 55, 445, 463 Kashi Prasad r. Kedar Nath Sahu 122 Kashy Nath Roy v. Surbanand Shaha 267 Kassa Mai v. Gopi 658 Kathama Natchiar r. Dorasingu 182 Kaufman r. Gerson 131 Kay v. Groves 447 Keay v. Fenwick 542 Kedaii Bin Ranu v. Atmaram- bhat 84, 162 Kedannal Bhuramal v. Surajmal Govindram 240, 555, 565 Kedar Nath v. Gorie Mahomed 15 Keighley, Maxted &; Co. r. Durant 538 Keir i: Leeman 130 Kellock v. Enthoven 439 Kelner r. Baxter 538, 591 Kemble v. Farren... 322, 323, 406, 407 Kemp r. Falk...382, 390,401, 402, 404 Kendal r. Wood 637 Kendall r. Hamilton ...226, 228, 230, 628 TABLE OF CASES. xli PAGE Kennedy r. Gouveia 586 v. Panama Mail Co. ... 106 Kensington r. Inglis 588 Kesarichand v. Merwanjee ...182, 192 Keshav v. Rayapa 642, 658 Kessowji v. Hurjivan 80, 132 Khairat Husain r. Haidri Begam 296 Khairunnessa Bibi r. Loth Nath 58 Kharag Singh r. Bhola Nath ... 326 Khatun Bibi r. Abdullah 455 Khozan Sing T. The Secretary of State 300 Khubchand r. Beram 127 Khurram Singh r. Bhawani Bakhsh 326 Khushalchand r. Ibrahim 6 Khushal Singh r. Khawani ...288, 290 Kiam-ud-din r. Rajoo 264, 265 KidarNath v. Ajudhia 286 Kidderminster?-. Hardwick 543 Kingr. Gillett 272 - v. Hoare 227, 228, 229 Kingsman r. Kingsman 501 Kingston, Ex parte 571 Kingston r. Preston 243 Kingston-upon-Hull v. Harding 468 Kin lock r. Craig 507 Kirk r. Bell 519 Kirkham i: A tten borough' 351,352 Kirkpatrick, Re .509 Kirkstall Brewery r. Furriess Railway Co 607 Kirpa Ram v. Sami-ud-din 84 Kirtee Chunder v. Struthers 232 Kirti Chunder Chatterji v. Atkin- son 86.331 Kishari Lai v. Mogh Singh 293 Kishen Sahai -c. Bakhtawar Singh 302 Kistnasammy Pillay r. The Municipal Commissioners for the Town of Madras... 174 Klein wort c. Cossa Marittima Genoa 530 Knight r. Majoribanks 78 Knights i: W iff en 390 Knox v. Gye 65(5, 661 Koeglerr.TheCoringaOilCo.,Ltd. 175 Koudayya r. Narasimhulu 547 Kondeti Kama Row r. Nukamma 280 Kong Yee Lone & Co. v. Lowjee Nanjee 1.82, 13, 185, 192 Koomud Chunder Dass v. Chun- der Kant Mookerjee 177 Koylash Chunder r. Tariney Churn 43 Kreel r. Henry 199, 253, 251 Krishna r. Krishiiasami...591, 592, 620 Krishna Kumar r. Brojo Nath Roy 336 Krishna Ram r. Rakmimi Sewak Singh 231 Krishnan v. Sankara Varma 280 Krishnappa Chetti r. Adimula Mudali 121 Krishnaravr. Manaji 215 Krishno Kamini Chowdhraui v. Gopi Mohun 288 PAGE Krishto Kishori Chowdhrain v. Radha Romun 459,461, 466 Kristodhone Ghose r. Brojo Gobindo Roy 146 Kruger r. Wilcox 572 Kundan Bibi v. Sree Narayan... 56 Kundan Lai v. Nathu 141 r. Secretary of State for India 35 Kunhan v. Bank of Madras 505 Kunja Behari Singha v. Bhupen- dra Kumar Dutt 301 Kunjbeharilal r. Ilahi Bakhsh... 335 Kunwar Ram Lai r. Nil Kanth 134, 135, 137 Kuppa Gurukal r. Dora Sami ... 143 Kuppusami Naidu v. Smith & Co 176 Kuttayan Chetty r. Palaniappa Chctty 350 Kuvarji i: Moti Haridas 276 Kuverji ?. Great Indian Penin- sular Railway Co 8, 488 LA BANQUK v. La Banque 144 La Banque Jacques Cartier r. La Banque d'Epargne, etc. 541 Lacey, Ex parte 560 Lachman r. Bapu 445 Lachman Das r. Chater 341 Lachmi Dai M oh u tain v. Kissen Lai 39 Lachmi Narain i: Fatah Bahadur 10, 60 r. Vernon 316 Lacy r. Hill 574 Ladhu v. S. P. & D. Railway ... 491 Lady well Mining Co. v. Brookes 562 Lagunas Nitrate Co. v. Lagunas Syndicate 557 Laidlaw v. Organ 91,93 Laidler r. Burlinson 354, 357 Laingv. Barclay, Curie & Co.... 356, 357 Lakeman r. Mountstephen 585 Lakhmi Das r. Babu Megh 493 Lakhmichand r. Chotooram...546, 547 Lakoran Skeikh Nabbi r. Madar Baksh 124 Lakshmana Ayyan r. Ranga- sami Ayyan 232 Lakshmi Doss r. Roop Loll... 79, 87, 88 Lakshminarayana c. Subhadri Ammal 128,157 Lakshmishankar r. Motiram 590 Lakshumandas r. Lane 593 Laksmishankar r. Vishnuram ... 228, 229 Lala Banshidhar c. The Govern- ment of Bengal 263,447 Lai Achal Ram r. Raja Karim Husain Khan 137 Lalbhai r. Kavasji 658 Lalchand Balkissan i: Kersten 239 Lalli v. Ram Prasad 84 Lai Saha v. Monmohan Gossami 267 Lambton, Ex parte 356 Lamond r. Davall 409 Lampleigh r. Brathwait...21, 295, 440 xlii TABLE OF CASES. PAGE Lang r. Smyth 610 Langhorn r. Allnutt 608 Langmead's Trustees, Be 653 Langton r. Higgins 362 Lanyon r. Toogoocl 369 Lara r. Hill 568 Laugher r. Pointer 605 Law r. Law 649 - v. Redciitch Local Board ... 340 Lawless r. Calcutta Landing and Shipping Co 557 Lawrence, lie 573 LaxniHmlal r. Mulshankar 147 Laxumibai r. Ganesh Raghunath 159 Leask r. Martin 505 v. Scott 403 Le Blanche r. L. & N. W. Ry. Co 314 Leer. Griffin 344, 345 r. Jones 475, 476 r. Walker 556 Leeds Banking Co., He 533 Leeds, etc., Theatre of Varieties 562 Leete r. Leete 570 Le Geyt r. Harvey 386, 415, 418 Leigh r. Paterson 220, 306 Lennard r. Robinson 586 Levy v. Barnard 572 r. Green 433, 434 r. Walker 618, 640 Lewis f. Brass 43 (-.Nicholson 585 r. Read 541 r. Samuel 574 Liles r. Terry 77, 78 Lilladhar r. George Wreford 399, 400 Lilley r. Doubleday 552 Linck v. Jameson 528 Lishman v. Christie 531, 607 Lister & Co. r. Stubbs 561 Litt r. Cowley 399 Liverpool Household Stores, Re 519 Livingstone r. Ross 519 Llanelly Ry. & Dock Co. r. L. &N. W. Ry. Co 38 Llewellin, Be 571 Lloyd r. Guibert 10, 529 Lloyds r. Harper 448 Lock r. Furze 315, 317 Locke r. Prescott 506 Lodge r. Pritchard 652 Logan r. Le Mesurier 358 London Chartered Bank r. White 505 London, Chatham & Dover Ry. Co. r. S. E. Ry. Co 319,320 London & County Bank r. Rat- cliffe 506, 571 London Financial Association r. Kelk 614 London Joint Stock Bank r. Simmons 571, 603 London Tramways Co. r. Bailey 176 Long r. Miller 585 Lord Advocate r. Young 377 I.orymer r. Smith 424 Lovelock r. Franklin 435 Lowe r. Fox , 266 PAGE Lucas r. Dorrein 505 Luchman Lall r. Ram Lall 657 Luchmeswar Sing Bahadur r. Syad Lutf Ali Khan 260 Lukmidas Khimji r. Purshotam Haridas 227,228,229 Lunn r. Thornton 372, 373 Lupton r. White 495 Lutchmanen r. Siva Prokasa 620 Lutscher r. Comptoir d'Escompte 507 Lyell r. Ganga Dai 486 - v. Kennedy 539, 543 Lyon r. Knowles 615 Lyons r. Elliott 608 Lyons, Mayor of, r. East India Co. 2 r. Hoffnung 398 McBAiN f. Wallace McCarthy r. Young McClean r. Kemiard McCollin r. (Jilpin McCorkindale, Be 8, McEwan r. Smith 379, Macfarlane r. Taylor McGowan r. Dyer Machaima r. Usman Beari Mackay r. Commercial Bank of New Brunswick ... r. Dick 247, McKenzie r. British Linen Co. Mackenzie r. Chamroo r. Pooley r. Shib Chunder Seal r. Striramiah Mackertich r. Nobo Coomar Roy Mackillican r. Compagnie des Messagerhs Maritimes de France 28, Mackinnon r. Lang 589, Mackintosh v. Crow 323, - r. Hunt 104, r. Wingrove Maclenn v. Dunn 407, McLean r. Fleming 607, McMahon r. Field Madden r. Kempster Madgwick r. Wimble Madhavji r. Ramnath Madho Singh r. Kashi Ram Madhub Chunder r. Rajcoomar Doss 45, Madhwa Sidhanta r. Venkatara- iiianjulu Madras Harbour Trustees r. Bust & Co Madras Ry. Co. r. Govinda Ran Maganbhai Hemchand r Mauch- habhai K allianchand 1 90, Mahalinga Nadar v. Ganapathi Subbicn 496, Mahamad r. Parameswara Mahamed Ishag r. Sheikh Akra- mul Hug Maharaja of Benares v. Har Narain Singh 347 486 641 585 508 391 427 604 59 605 248 540 35 530 241 168 306 489 590 326 326 86 408 531 313 570 659 108 86 165 6, 7 492 28, 310 512 121 233 260 TABLE OF CASES. xliii Maharana Shri Jasvatsingji Fatesingji r. The Secretary of State for India 411 Mnhbub Jan r. Nurud-Din 159 Mahomednlly v. Schiller 518 Mahomed Arif r. Saraswati 55 Mahomed Buksh r. Hosseini Bibi 82 Mahomed Kola Mea r. Harpenick, Add. Mahomed Sultan Sahib v. Robinson 522 Mahony r. Kekute 589 Makin r. Watkinson 285 Malukchaml r. Shan Moghan ... 521 Manbyr. Scott 523 Mancharam c. Pranshankar 143 Manchester Trust r. Furness . . . 530, 585, 603 Manchubhai r. Tod 553 Mangal Sen r. Shankar...267, 268, 269 Mangalathammal r. Narayana- swami Aiyar 293 Manian Patter r. Madras Ry. Co. 340, 342 Manindra Chandra Nandy v. Jamahir Kumari 293 Manjunatha r. Devamma 635 Man Kuar r. Jasodha Kuar ...128, 157 Manmohandas r. Macleod 91, 121 Mann r. Forrester 572 Manna Lai r. Bank of Bengal 151, 153 Mannu Singh r. Umadat Pande 78 Manohar Das r. Ram Antar 123 Manohur Koyal r. Thakur Das Naskar 263, 273 Manoo Bepari v. Durga Churn Saha 328 Mansell r. Clements 568 Mansuk Das r. Rangayya Chetti 220 Madam Bibi r. Sakina 81 Marsh r. Jelf 529 r. Joseph 542 (-.Keating 631 Marshall r. Berridge 308 Martindale r. Smith 390, 407, 436 Martineau r. Kitching 360, 370 Martyn r. Gray 624 Marudamuthu i: Rangasami ... 119 Marvin r. Wallace 376, 378 Masjidi r. Mussammat Ayisha...72, 79 Mason, lie 573 Master r. Miller 266 Masulipatam, Collector of, r. Cavaly Vencata 540 Mather, HP 576 Mathra Dass r. Ramanand 344 Matthews r. Munster 526 Maugban r. Sharpe 618 Mauji Ram r. Tara Singh 540 May r. Harvey 500 Maya Ram r. Naubat 335 Mayen f. Alston 562 Mayhew r. Crickett 472 Mear r. L. & S. W. Ry 517 Medina, The 529 Meekr. Wendt 599 Megaw v. Molloy 424 Meghan Dube r. Pran Singh ... 56 PAGE Meherally v. Sakerkhannobai 124, 257 Mehr Singh r. Chela Ram 234 Meredith v. Footner 607, 608 Merryweather v. Nixan 231, 232 Mersey Steel and Iron Co. r. Naylor, Benzon & Co. ...217, 244, 435 Merwanji r. Rustomji 661 Mesha Ahronel r. The National Bank of India 267 Metcalf r. Bruin 651 Metropolitan Bank r. fleiron ... 561 Mews v. Carr 528 Meyer v. Dresser 9 Miajan Patari r. Abdul Juhhar 337 Michael r. Briggs 589 r. Hart&Co 306 Mildred r. Maspons 572 Miles, Ex parte 399 - r. Gorton 379, 383 r. New Zealand Alford Estate Co 23, 151 Milgate r. Kebble 378 Miller v. Nasmyth's Patent Press Co., Ltd 504, 507 Mills f. Dunham 167 Millvvard v. Littlewood 127 Mirabita r. Imperial Ottoman B:.nk 365 Mir Sarwarjan r. Fakharuddin 58 Misa r. Currie 505, 506, 571 Mitchell r. Homfray 75 f. La page . Mitchell, Reid & Co. r. Buldeo Doss 350, 382, 420 Mitcheson v. Oliver 530 Mody r. Gregson 424, 426 Moffatt r. Bateman 557 r. Parsons 602 Mohendra Nath r. Kali Proshad 551 Mohesh Chandra r. Boydya Nath 231 Mohesh Chandra Bosu r. Radha Kishore Bhattacherjee 518 Moliori Bibce r. Dhurmodas Ghose 53, 55, 56, 57, 276, 286 Mohun Lall v. Sri Gungaji Cotton Mills Co !>4 Moliur Singh v. Sher Singh 296 Moll, Schutte & Co. r. Luchmi Chand 409 Mollett r. Robinson 559 Moll wo, March & Co. r. Court of Wards 612, 615, 616, 621, 624 Molony r. Kernan ,.. 561 Mondel r. Steel 432 Monhunlal Tribhuwandas r. Chunilul Harinarayan 304 Monmohini Guha r. Banga Chandra Das 125 Montagu t. Forwoogers 2 Narain Das r. Chait Ram 326 Narain Singh r. Mata Prasad Singh 443 Narasimma v. Anantha Bhatta... 143 Narayjn r. Ganesh 473 r. Raoji Ill Narayan Coomari Debi r. Shajani Kanta Chatterjee ...125, 152, 564 Narayan Undir Patil v. Motilal Ramdas 177 Narayana Chetti r. Lakshmana Chetti 229 Narayanasami r. Lokanibalam- mal 13 Narayanasami Naidu r. Narayana Rau 330 Narayansami i: Osuru Reddi ... 300 Narotum r. Nanka 59 Nash r. Inmaii 57 Nath r. Nibaran Chandra 323 Nath Prasad r. Baij Nath 28S.2!i7 Nathu r. Balwantrao 298 Nathubhai r. Javlier 59, 522 r. Mulchaud (i National B jlivian Navigation Co. v. Wilson 602 Naushani Begam r. Iiiti/ar Begam 82 Navasimma r. Anantha Bhatta 143 Nawab Mir Kamaludinr. Partap Mota 291 Neale r. Gordon Lennox 527 Neck ram c. Bank of Bengal 512 Neel Comul Mookerjce .r. Bipro Dass 651 Neilson r. James 557 Nelson /-. Aid ridge ">-".> Nevill, lie. Ex part c White 519 New r. Swain 387 New South Wales, Bank of, r. O'Connor 510 New Zealand and Australian Land Co. r. Watson 535 Newall r. Tomlinson 610, 611 Nicholson, He 573 v. Bradtield Union ... 435 v. ( hapman 502 r. Harper 416 v. Ricketts 637 Nim Chmd r. Jagabundhu ...... 512 TABLE OF CASES. xlv PAGE Nirpat v. Shadi 260 Nitidals Taendstikfabrik v. Bruster 5G9 Nobin Chunder v. Romesh Chunder 7 Nobiu Krishna Bose v. Mon Mohun Bose 297 Nordenfelt v, Maxim Nordenfelt Co 164, 171 Norrington v. Wright 244, 251 North British Insurance Co. v. Lloyd 476 North-Western Bank v. Poynter, Son & Macdonalds 509, 573 North-Western Provinces Club v. Sadullah 589 Norton . Herron , 585 Nottingham Building Society r. Thurstan 276 Nottingham, Hide & Co. v. Bottrill 447 Netting Sill, The 314 Nowell v. Nowell 642 Nundo Kishore Lall v. Musst Ramsookhee Kooer 264 Nundo Lai v. Nistarini 526, 527 NurAli Dubashr. Abdul Ali... 165, 167 Nursey Spinning and Weaving Co., Re 1 J6, 101 Nyberg v. Handelaar 494, 516 " OAKDALE," The 590 Oakes & Co. . Jackson. ..164, 166, 171 Oakley v. Pasheller 451 Gates v. Hudson 611 Oceanic Steam Navigation Co. r. Soonderdas Dhurumsey...96, 97 Odessa Tramways Co. v. Mendel 609 Offord v. Davies 34, 449 Ogdent'. Hall 586, 589 - v. Ogden 10 Ogg r. Shuter 365,367 Ogle v. Vane, Earl 303 Olati Pulliah Chetti v. Varada- rajulu Add. Ollivant v. Bayley 429 Omda Khanum v. Brojendro 10 Onward, The 530 Oom v. Bruce 588 Oppenheimerw. Attenborough 410, 412 v. Frazer & Wyatt 410, 414, 415 Oriental Bank Corporation v. Fleming 66, 67, 95 Oriental Financial Corporation v. Overend, Gurney & Co.... 465 Oriental Government Security Life Ass. Co.. Ltd. r. Nara- simha Chari ' 29, 279 O'Rorke v. Bolingbroke 82 Oscanyan v. Winchester 144 Oswald v. Mayor of Berwick ... 452 Overend v. Gibb.. 557 Overend, Gurney & Co. v. Orien- tal Financial Corporation... 451, 452 Owen v. Cronk 611 Owen & Co. v. Cronk 536 Oxford v. Provand .., ,249 PAGE PADQ-KT v. Priest 611 Page v. Cowasjee Eduljee 408 v. Cox 19 v. Morgan 376 v. Newman 320 Paice v. Walker 586 Palmer v. Hutchinson 591 v. Wick, etc., Steamship Co 232 Panmure, Etc parte 600 Pape v. Westacott 524 Paquin v. Beauclerk 523 Parakh Govardhanbhai Hari- bhai r. Ransordas Dulabh- dhas 187, 194 Paramma v. Ramachandra 268 Parana, The 305 Parbhudas Pranjivandas v. Ram- lal Bhagirath 244 Pardhan Bhukhan Lal-r. Narsing Dyal 328, 329, 330 Park v. Hammond 557 Parker, .Re 576 v. Ibbetson 567 v. Lewis 440 v. McKenna 561 v. Palmer 423, 424 r. S. E. Ry. Co 28 v. Wallis ... .431 v. Winlow 586 Parkins v. Hawkshaw 608 Parkinson r. Lee 426, 430 Parmichand v. Nanoo Sauker ... Add. Pater v. Gordon 590 Paterson r. Gandasequi 597 Pattinson v. Luckley 266 Paul Beier r. Chotalal Javerdas 52 Pava v. Govind 334, 335, 337 Pavanaga r. Govind 7 Payne, Re 582 v. Cave 34 v. Hornby 653 v. Leconfield 529 Peacock v. Baijnath 405, 506, 535 Pearce r. Brooks 115, 126 Pearl v. Deacon 472 Pearson r. Goschen 531 v. Scott 525, 565 Pearson's Case 561 Peek v. Gurney 91 Pepin v. Chunder Seekur Mooker- jee 440 Peria Sami v. Representatives of Salugar 106 Periasami Thalavar r. Subra- manian Asari 32G Perosha v. Manekji 182, 184, 187, 188, 189, 190, 191, 192, 194 Perry v. Barnett 575 v. Liverpool Malt Co 176 Pertab Chunder r. Mohendra- nath Purkhait. 97 Pertab Singh r. The Secretary of State 299 Perundevitayar v. Nammalvar. . . 487 Pestanji v. Matchett 546 Pestonji v. Gool Mahomed 521 xlvi TABLE OF CASES. PAGE Fetch r. Turner 608 v. Tutin 372 Petherperumal r. Muniandy 280 Petty r. Cooke 4(53 Phalli v. Matabadal 122 Phelps, Stokes & Co. r. Comber 406 Phillips r. Alhambra Palace Co. 224 v. Foxall 448, 468 Phillpotts v. Evans 220, 435 Phoenix Bessemer Steel Co., lie 390 Pichakutty Mudali v. Naraya- nappa 128 Pickering i'. Busk 602 v. Ilfracombe Ky. Co. 145, 146 Pickernell r. Jauberry 531 Pidock v. Bishop 475 Pigot v. Cubley 511 Pike v. Ongley 587 Pillai v. Ramalinga Pillai 125 Pillay v. The Municipal Commis- sioners of Madras 174 Pinet & Cie. r. Maison Louis Pinet 619 Pini v. Roncoroni 659 Piriasami Thalavar v. Subra- manian Asari 326 Pirtha Das v. Hira Singh 280 Pirthi Mai v. Gopi Nath 510 r. Mussammat Bhagan 126 Pitamber v. Cassibai 317 v. Jagjivan 140 Planche* v. Colburn 435 Pledge r. Buss 472 Pogose v. Bank of Bengal ...452, 469 Polak v. Everett 454, 457, 473 Pole v. Leask 523 Poma Dongra r. William Gillespie 86, 104 Pooley v. Driver 613, 621 Poonoo Bibee v. Fyez Buksli ... 147, 155, 257 Porter r. Incell 621, 624 Potts*. Bell 129 Poulton r. Lattimore 432 Poussard v. Spiers and Pond ... 254 Pow v. Davis 600 Powell v. Brodhurst 234, 634 v. Jones 534, 561 Power v. Butcher 578 Powles r. Paye 583 P. R. and Co. v. Bhagwandas Chaturbhuj 311 Pragji r. Pranjiwan 166 Prag Narain v. Mul Chand 409 Pratt v. Vizard 571 Prayag v. Shyam Lai 336, 337 Premabhai v. Brown 580 Premji r. Dossa 635 v. Madhowji 594 Prem Narain Singh r. Parasram 85 Prem Sook r. Dhurum Chand ... 168 President of the Taluk Board, Kundapur, r. Burde Laksh- minarayana 341 Prestwich v. Poley 527 Price v. Easton 18 Prickett v. Badger 550, 568 PAGE Priest r. Last 428 Priestly v. Fern ie 597 Pringle v. Jafar Khan 194 Prokash Chandra r. Adlam 125 Prosad Doss r. Russick Lall 657 Protab Chunder v. Gour Chunder 463, 464 Protima Aurat v. Dukhia Sirkar 127 Proudfoot r. Montefiori 682 Provincial Insurance Co. r. Leduc 588 Pudishary Krishnen r. Karam- pally 80,132 Pullen Chetty r. Ramalinga Chetty 125 Punchanun Ghose r. Daly ...452, 404 Punjab v. Petum Singh 231 Purmanundass v. Cormack 597 Purshotamdas Tribhovandas r. Purshotamdas Mangaldas ... 139, 222, 255 Pushong r. Munia Halwani 78 Pusi v. Mahadeo Prasad 59, 522 Puttappa Manjaya r. Virabha- drappa 240 Putti Narayanamurthi r. Mari- muthu 479 Pybus v. Gibb 452 QUARMAN v. Burnett 623 Queen Empress r. Appavu 344 v. Joggessur Mochi 344 Queen of Spain v. Parr 569 RADHA . Kinlock 459, 461, 466 Radha Bai r. Kamod Singh 122 Radha Krishna Das r. Municipal Board of Benares 281, 283 Radha Madhub Samonta r. Sasti Ram Sen 289 Raffles v. Wichelhaus 63, 70 Raghavan v. Alamelu Animal 292, 297 Raghoji v. Abdul Karim 159 Raghunath v. Nathu Hirji 118 r. Varjivandas 78 Ragnath Sahal r. Mam Raj 187 Ragoonathdas r. Morarji 591, 636 Rahmatulla v. Ganesh Das 265 Railton r. Mathews 474 Rainbow r. Howkins 437 1: Juggins 472 Rainbow, The 573 Raja Mohkan Singh v. Raja Rup Singh 84, 104, 135 Raja Rai Bhagwat Dayal Singh r. Debi Dayal Sahu 538 Raja Ram v. Meher Khan 264 Rajah Papamma Row v. Sitara- mayya 78 Rajah Venkatagrin r. Vudutha Subbarayudu 296 Rajah Vurmah ^ 7 alia r. Ravi VurmahKunhi 143 Rajan Harji r. Ardeshir Hor- musji 125 Rajkristo Moitro v. Koylash Chunder ., 132 TABLE OF CASES. xlvii PAGE Rajlukhy Dabee v. Bhootnath ... 155 Raj Narain v. Ful Kumari Debi 449 Rakhmabai v. Govind 19 Raman v. Vairavan 597 Raman Chettiyar v. Gopalachari 240 Ramanuja v. Narayana 135 Ramanund i\ Chowdhry Soonder Narain 455 Ramasami r. Kadar Bibi 657 r. Rajagopala 79 Ramasami Chetti v. Manikka Mudali 235 Ramasamy Kon's Case 269 Ramayya r. Chandra Sekara 657 Ramayyar v. Shanmugam 267 Ram Bharose v. Kallu Hal 635 Rambhat v. Timmayya 140 Ramchandra v. Bhimrav 7 v. Damodhar 645 Ramchandra Atmaram i: Damo- dar Ramchandra 290 Ramchandra Chintaman v. Kalu Raju 152 Ram Chand Sen v. Audaito Sen 139 Ram Chunder v. Manick Chunder 657, 661 Ram Coomar Coondoo v. Chunder Canto Mookerjee 2, 133, 134, 135, 137 Ram Das v. Official Liquidator Cotton Ginning Co 32 Ramdoyal v. Junmenjoy 622 Ramendra Roy r. Serajuddin Ahamed 328 llameshwar Prosad v. Lachmi Prosad 151 Rameshwar Prosad Singh r. Rai ShamKishen 326,330,332 Rameswar Koer v. Mahomed Mehdi Hossein Khan 259 Ramghulam v. Janki Rai 174 Rainier v. Shunmugam Pillai ... 267 Ramji v. Dharma 159 Ram Kinkar v. Akhil Chandra... 234 Ram Kishen v. Rani Bhagwan Kaur 299 Ramkrishna v. Ramabai 233 Ramlal Thakursidas v. Lakhme- chand Muniram 620 Ramloll Thackoorseydass r. Soo- jumnnll Dhondmull 180 Ram Narain r. Ram Chunder ... 233, 235 Rampal Singh v. Balbhaddar Singh... 581 v. Murray & Co. 491, 492 Rampartab v. Foolibai 628 Ram Pershad Singh v. Neerbhoy Singh 231 Ram Pertab v. Marshall 603 Ram Prasad v. Salik Ram 290 Ram Sarup v. Kishan Lai 122 Ramsebuk v. Ramlall Koondoo 233, 234 Ramsgate Victoria Hotel Co. v. Montefiore 39 PAGE Ram Sukh v. Brohmoyi Dasi ... 485 Ram Tuhul Singh v. Biseswar Lai 290,297 Ranchhoddas Nathubhai v. Jey- chand Khushalchand 1 59 Ranchod i: Manmohandas 318 Randall v. Newson 426,427 Ranee Lallum Monee Dossee r. Nobi Mohun Singh 139 Rangammal v. Venkatachari 280 Ranganayakamma r. Alvvar Setl.i 73, 80 Rangasawmi v. Trisa Maistry ... 255 Ranguath v. Govind 80, 87 Ranjit Singh v. Naubat 459, 461, 462, 466, 467 Rasaji v. Sayana 326 Rash Behary Shaha v. Nrittya Gopal Nundy 217, 219 Rawson v. Johnson 246 Ray v. Barker 351, 352 Raymond v. Minton 285 Rayner v. Grote 600 Read v, Anderson 188, 548 v. Rann 567 Readhead v. Midland Ry. Co. ... 430 Reddaway v. Banham 619 Redgrave r. Hurd 101 Redpath v. Wigg 586 Reed v. Norris 479 Rees v. Berrington 463 v. De Bernardy 133 Reeve v, Davis 531 Reg. v. Ashwell 484 r. Demers 36 r. McDonald 483 Reid v. Macbeth and Gray 356 v. Rigby & Co 605, 631 Renpor, The 529 Renter v. Sala 251 Reyner r. Pearson 608 Reynolds v. Jex 531 Rhodes r. Bate 77,79 v. Forwood 549 -v. Moules 630 Richardson v. Anderson 528 v. Goss 507 v. Rowntree 28 v. Williamson 599 Ridgway i\ Clare 652 v. Wharton 43 Ridley c. Plymouth Grinding Co. 519 Right and Fisher v. Cutbell 543 Ripley v. McClure = 221 Roberts, Re 378 v. Barnard 568 v. Bury Commissioners 247 1\ Crowe 439 r. Ogilby 566 r. Security Co 41 v. Smith 197 Robertson v. Amazon Tug and Lighterage Co.... 487 v. Clarke 530 v. French 52 v. Wait 587 Robinson i\ Ashton 640 xlviii TABLE OF CASES. PAGE Robinson c. Davison 253 v. Geisel 230 r. Harkiu 480 v. Harman 315, 316 v. Mollett 527,528 r. Read 597 v. Butter 570, 592 Robson r. Drummond 224 r. Kemp 573 Rocher v. Busher 530 Rodger r. Comptoir d'Escompte de Paris '. 403 Roehm r. Horst 221 Rogers r. Hadley 592 Rogers, Sons & Co. v. Lambert &Co 501 Rohde v. Thwaites 361 Rohilkhand and Kumaun Bank r. Row 54 Rolfe r. Flower 262, 629 Rolland r. Hart 583 Roots v. Lord Dormer 437 Roper r. Johnson 306, 436 Rosevear China Clay Co., Ex parte 396 Ross v. Parkyns 615 Rossiter v. Walsh 562 Rouse v. Bradford Banking Co. 451 Roushan Bibee v. Hurray Kristo Nath 263 Routh v. Macmillan 526 Routledge v. Grant 34 Rowe K. Pickford 395 Royal Bristol Permanent Build- ing Society r. Bomash 316 Ruben v. Great Fmgall Consoli- dated 68, 606 Rugg r. Minett 359 Rughoonauth c. Manickchund... 170 Russell r. Russell 645 Rustomji r. Sheth Purshotamdas 657, 659 Ruttonsey v. Jamnadas 213 Ryder v. Wombwell 58 SABIHAN BIBI v. Madho Lai ... Ill Sadagopa Ramanjiah r. Mac- kenzie 168 Sada Kavaur v. Tadepally 107 Sadashiv -r. Trimbak 55 Sahib. Ram v. Nagar Mai 126 Saiyid Ali Khan r. Debi Prasad 512 Sajaji v. Maruti 326 Salford, Mayor of, v. Lever ...561, 609 Salomans r. Pender 561 Salter r. Woollams 380 Salvesen & Co. *. Rederi Aktie- bolaget Nordstjernan Samalbhai v. Someshwar Saminatha v. Muthusami Samuel t\ A nanthanatha Samuell v. Howarth Sanderson v. Aston v. Collins . .. 598 .. 619 .. 143 .. 18 .. 456 .. 454 .. 492 Sankana r. Virupakshapa... 445,459, 466 PAGE Sankara r. Sankara 324 Sankaranarayana Vadhyer r. Sankaranarayana Ayyar ... 329, 330, 336, 337 Sankarappa r. Kamayya 125 Saral Chand Mitter v. Sreemutty Mohun Bibi 59 Sarat Chandra Dey v. Gopal Chandra Laha 623 Sarat Chandra Roy r. Rajoni Mohan Roy 108,446 Sardar Muhammad v. Babu Daswandlie 566 Sarju Prasad v. Beni Madho 333 Sashannah Chetti v. Ramasamy Chetti 127, 152 Sashi Bhusan v. Jadu.Nath 55 Sasoon v. Tokersey 181, 182, 184, 188, 189, 190, 193 Sass, Re 471 Satish Chunder v. Hem Chunder 86 Saturjit Pertap Bahadoor v. Dulhin Gulab Koer 541 Saunadanappa v. Shivbasawa ... 7 Saunders v. Stuart 307 . Sun Life Assurance Co. of Canada 619 Sayad Muhammad v. Fatten Muhammad 61 Scarf v. Jardine 262, 626 Scarfe v. Morgan 503 Schmaltz v. A very 590, 600 Schonlank i: Muthunagana Chetti 34 Schotsmans r. L. & Y. By. Co. ... 394, 396 Schntze r. G. E. Ry. Co 310 Scotson v. Pegg 153 Scott r. Avery 175 v. England 437 c.Irving 528 K. Littledale 63 v. Pettit 395 v. Sebright 70 v. Uxbridge and Rickmans- worth Ry. Co 212 Seager i. Hukma Kessa 415, 514 Searle v. Laverick 487 Seathv. Moore 355, 356,357 Seaton v. Burnand 476, 477 Secretary of State for India v. Abdul Rahim 320 r. Arathoon 197 r. Fernandes 293 v. Kamachee Boye ... 539, 540 v. Nilamekam 476 v. Sheo Singh 484 r. Sheth Jeshingbhai 106 Seddon r. North Eastern Salt Co. 436 Seth Gokul Dass r. Murli Ill, 125 Seton r. Slade 544 Sewdutt Roy Maskara i: Naha- piet 601 Seymour r. Bridge 575 r. Pychlau 578 Shadi Ram r. Mahtab Chand . , 516 TABLE OF CASES. xlix PAGE Shadwellr. Shadwell 153 Shah Rahman v. Ismail Khan ... 131 Shaik Alii v. Mahomed 458 Shaik Ismail v. Amirbibi 82 Sham Charan Mai v. Chowdhry Debya Singh 286 Shama Charan K. Chuni Lai 122 Shama Purshad Roy r. Hurro FurshadRoy 301 Shambati Koeri v. JagoBibi 81 Sham Koer v. Dah Koer 81 Sham Lall Mitra v. Amarendro Nath Bose 280, 286 Shandw. Grant 610 Shankar v. Mohanlal 414, 415 Sharland v. Mildon 611 Sharpe v. Foy 583 Shaw v. Baij Nath 518 v. Picton 566 v. Woodcock 519 Shee v. Clarkson 567 Sheffield Corporation r. Barclay 438, 575 Sheffield v. Eden 508 Sheldon v. Cox 344 Sheoambar v. Deodat 177 Sheo Narain r. Mata Prasad 142, 564 Shepherd v. Harrison ...364, 365, 366, 367, 368 Sheppard r. Oxenford 660 Sheridan v. New Quay Co 501 Shet Manibhai v. Bai Rupaliba 599 Shiam Lai r. Chhaki Lai 564 Shib Chandra Roy r. Chandra Narain Mukerjee 558 Shibho Mai r. Lachman Das... 187, 575 Shiddheshvar r. Ramchandrarav 538 Shidhappa v. Shivalingappa 654 Shidlingappa v. Shankarappa ... 660 Shields v. Wilkinson 492 Shiells v. Blackburne 557 Shipway v. Broadwood 609 Short t: Spackman 588 Shoshi Mohun Pal r. Nobo Kristo Poddar 102, 360, 371, 431 Shridhan Gopinath v. Gordhan- das Gokuldas 303 Shri Ganesh v. Keshavrav 7 Shrinivas v. Raghunath 158 Shripatrav v. Govind Narayan .. . 160 Shriram r. Madangopal 245 Shrish Chandra Roy v. Mungri Bewa 516 Shugan Chand t: Government of North-Western Provinces ... 300 Silvester, .Re 450 Simmons r. Swift 358 Simons r. Patchett 599 Simpson v. Chapman 655 - r. Crippin 244 r. Lamb 568 __, r . L. & N.-W. Ry. Co.... 311 Sims t'. Bond 578, 594 v. Landray 528 Simson v. Gora Chand Doss 213 - v. Virayya 218, 249 Sinaya Pillai v. Munisami Ayyan 276 I.C. PAGE Sindha Shri Gampatsingji v. Abraham 15, 21, 156 Sirdar Kuar v. Chandrawati 264 Sital Prasad v. Parbhu Lai 80 Sitaram r. Doji 267 r. Mussamut Aheeree Heerahnee 123 r. Shridhar 235 Sitaram Marwari v. Thompson... 47 Sitarampur Coal Co. v. Colley ... 557 Siva Panda v. Jujusti Panda ... 232 Siva Ramayya v. Ellamma 135 Skeikh Ahbar v. Sheikh Khan... 265 Skillett v. Fletcher 454 Skinner v. Jager 504 Sloman v. Walter 340 Smart r. Sandars 527, 545 Smethurst v. Mitchell 597 Smith, Re, Ex parte Bright 519 Smith v. Anderson 613 - v. Bailey 626 v. Bedouin Steam Naviga- tion Co 531,607 v. Chadwick 103 r. Dinonath 288, 297 r. Green 309 r. Hughes 63, 93 v. Jeyes 659 v. Kay 76 r. Lascelles 552 v. Lyon 592 v. Patrick 262 r. Sorby 609 r. White 115 r. Winter 654 Smout v. Ilbery 551 Snee v. Prescott 587 Snook v. Davidson 572 r. Watts 62 Snowdon, Ex parte 481 Socie"t Ge"ne"rale de Paris v. Tramways Union Co 583 Solly v. Rathbone 571 Solomon v. Barker 553 Solomons v. Bank of England... 506, 571 Somu Pillai v. Municipal Council, Mayavaram 144 Sooltan Chund v. Schiller ...216, 218, 244, 245 Soopromonian Setty v. Heilgers 589, 590 Soper v. Arnold 353 Sorabji v. Dulabhbhai 658 South Australia Insurance Co. r. Randell 344. 347, 484 Southwell r. Bowditch 585 Spalding r. Ruding 403, 405, 507 Spartali r. Benecke 388 Spears r. Hartley 573 Spedding r. Nevell 600 Spence -i: Union Marine Insur- ance 495 Spencer v. Harding 47 Spiers v. Hunt 127 Spittle r. Lavender 585 Sreegopal r. Ramchurn 44 d TABLE OF CASKS. PAGE Sri Kishen r. The Secretary of State for India in Council... 445 Srinivasa v. Rathnasabapathi 340, 341 Srirangachariar Bamasami r. Ayyangar 146 Staffordshire, The 530 Stainbank v. Shepherd 530 Standard Marine Insurance Co. 52 Stanleys. Dowdeswell 41 v. Jones 133 Stapleton, Ex parte 390 Stark, Re 450 Stark ey v. Bank of England ... 598 Startup r. Macdonald 201, 238 Stead r. Salt 635 Stearine Co. r. Heintzmann 553 Steel v. Dixon 481 r. Lester 617 Stenning, Re 261 Stephens v. Badcock 534 Sterne v. Beek 341 Steuart r. Gladstone 641 r. Kennedy 64 Stevens r. Biller 506 Stevenson r. Blakelock 508 r. McLean 34 r. Mortimer 588 Stewart r. Kennedy 64 v. Ram Chand 135 Stone v. Cartwright 536 Storehouse v. Gent 530 Street v. Blay 430 Street er v. Horlock 483 Strickland r. Turner 105 Stubhs r. Holywell By. Co 204 Subba Naidu v. Haji Badsha ... 166 Subba Pillai r: Bamasami Ayyar 565 Subba Bau v. Devu Shetti 220 Subbaraya v. Devandra 194 Subbarayudu v. Adinarayudu ... 658 Subrahmania v. Krishna 269, 270 r . Narayanan 546 SubramaniaAiyar v. Subramania Aiyar 7 Subraya Pillai v. Subraya Mudali 130 Subroya Chetty r. Bagammall... 450 Sudarsanam r. Narsimhulu...620, 645, 660 Sudhu Singh r. Lehna Singh ... 232 Sudisht Lai r. Sheobarat Koer... 81 Suffell v. Bank of England 266 Suja r. Pahlwan 479 Sultan v. Nana 126 Sultan, The 530 Sumer Chand r. Ardeshire 433 Sumer Singh r. Shib Lai 290 Sumpter r. Hedges 284 Sumsuddin v. Abdul 81 Sundaraja Ayyangar v. Pattana- thusami Tevar 286 Sundar Deo r. Bhagwan Das ... 515 Sundar Koer v. Bai Sham 86, 326, 332, 333. 338 Sunder Singh r. Kishen Chand 121 Sungut Lai i: Baijnath Boy... 260, 826 Suput Singh r. Imrit Tewari ... 231 PAGE Surendra Nath Sarkar v. Atul Chandra Boy 558 Surya Narain Singh r. Jogendra Narain Boy 328, 331 Suryanarayana ?. Narendra Thatraz 159 Sutton v. Grey 519 r. Tatham 521, 527 Swarnamoyee Debi r.Hari Das Boy 291 Sweet v. Pym 572 Sweeting v. Pearce 525 r. Turner 370,371,528 Swift r. Jewsbury 606 Swire v. Francis 605 r. Bedman 451 Sykes r. Beadon 566 Synge v. Synge 219, 221 TAHAL v. Bisheshar 177 Tailby r. Official Receiver 373 Taluk Board, Kundapur r. Burde Lakshminarayana Kampthi 341 Tamarasherri Sivithri v. Maranat Vasudevan 280 Tamvaco v. Simpson 573 Tanner v. Christian 585 v. Smart 159 Taplin r. Florence 545 Tapling r. Weston 608 Tarachand v. Girdhart Lai 86 r. Suklal 136 Taruak Chunder r. Jodeshur Chunder 418 Tasker v. Shepherd 224 Tate v. Hyslop 583 Tatia v. Babaji 153 Taylor, Re 573 r. Bowers 548 v. Caldwell 253 r. Chester 258 v. Kymer 572 v. Metropolitan By. Co. 610 r. Smith 376 Taylor, Stileman and Underwood, Re 508 Tejendro Narain r. Bakai Singh 339 Tejpal v. Ganga 276 Tekait Mon Mohini Jemadai r. Basanta Kumar Singh 124 Tek Chand r. Morice 327 Telu Mai r. Subha Singh 187 Tempest r. Fitzgerald 376 Tenant r. Elliott 566 Tennant, Ex parte 661 Tennent v. Tennents 162 Tetley r. Shand 578 Thacker v. Hardy 181 Thasi Muthukannu r. Shunmu- gavelu 127 y/teti*, The 530 Thirukumare'an r. Subbaraya... 661 Thithi Pakurudasu r. Bheemudu 118 Thol r. Henderson 307 Tholasirum r. Duraji 416 Thomas Beck r. Thomas Siddle 230 Thompson r. Adams 548 v. Hudson . 340 TABLE OF CASES. li PAGE Thomson r. Davenport 588, 594 Thorn v. City Rice Mills 239 Thome r. Heard 605 Thornton r. Kempster 64 Thoroughgood's Case (>5 Thota Venkatachellasami v. Kristnasawmy 43 Thynne v. Shove 641 Tidd, Re 485 Tiedemann and Ledermann Freres. Re 539 Tigress, The 393 Tillakchand r. Jitamal 158 Tippanna v. Southern Maratha By. Co , 490 Tod r. Lakhmidas 182, 184, 185, 189, 190, 207, 209, 225 Tolhurst r. Associated Cement Manufacturers 205, 225 Tooke r. Hollingworth 386 Toomey v. Rama Sahi 206 Toonya Ram v. East India Ry. Co. 490 Totakot v. Kurusingal 445 Tovvnley v. Crump 388 Townsend v. Jarmin 641 v. Inglis 603 Townsend's Case 32 Tredwin v. Holman 175 Trego v. Hunt 640, 641, 646, 649 Tribe v. Taylor 568 Tribhuvandas r. Motilal 187 Trickett v. Tomlinson 602 Trikam Damodhar r. Lala Amirchand 194 Trimbak v. Bhagchand 326 v. Bhagwandas 275 Trimble r. Hill 182 Trueman v. Loder 551 Trustees of the Harbour of Madras r. Best & Co 492 Tugman v. Hopkins 300 Tulsa Kunwar r. Jageshar Prasad 287, 288, 290 Turley v. Bates 360 Turner r. Ford 504 v. Goldsmith 568 v. Green 93 v. Letts 571 v. Liverpool Docks, Trus- tees of 365 v. Major 655 v. Thomas , 595 Turton i: Turton 619 Tutika Basavaraju v. Parry & Co. 589 Tweddle v. Atkinson 16, 17, 18 UDHO SHAH v. Hira Shah 264 Udit Narain v. Muhammad 283 Uganda, The 363 Ultzen v. Nicols 485, 492 Umarkhan r. Salekhan 323, 326, 328, 329, 330, 334, 335 Umed Kika r. Nagindas 222 Umesh Chandra r. Golap Lai ... 86 Umesh Chandra Banerjee r. Khulna Loan Co 292 Underwood r. Nicholls 524 PAGE Universal Stock Exchange, Ltd., r. Strachan 182, 191 Upend ra Chandra v. Tara Pro- sanna 296,297 VADILAL LALLUBHAI r. Shah Khushal Dalpatram 620 Vaidyanatha Ayyar v. Chin- nasami Naik 235 Vaikuntam v. Kallapiram 290 Vairavan v. Ponnayya 660 Vaithelinga r. Saminada 167 Vaithyanatham v. Gangarazu ... 142 Valentini r. Canali 276 Vallamkondu v. Malupeddi ...620, 659 Van Omeron v. Dowick 531 Vappakandu Marakayar v. Anna- malai Chetti 194 Vayangara r. Pariyangot 232 Vengideswara Putter v. Chatu Achen 323,326,336 Venkata r. Timmayya 286, 298 Venkata Kristnayya v. Lakshmi Narayana Add. Venkatasamy r. Rangasamy 155 Venkatasubbiah Chetty v. Govin- darajulu Naidu 629 Venkatesh v. Baba 267 Vicars v. Wilcocks 313 Villars, Ex parte 421 Vinayakrav v. Ransordas 563 Virasvami r. Appasvami 522 Vishnucharya v. Ramchandra ... 546, 549 110 139 218 Vishnu Sakharam r. Kashinath Visvanathan r. ]3aminathan Volkart Brothers v. Rutna Vein Chetti ... r. Vettivelu Nadan 344 Vyse v. Foster 655 Vythilinga v. Ravana 335, 337 v. Sundarappa 326 WADDINGTON r. Bristow Waghela Rajsanji r. Shekh Masludin Wahid Ali r. Ashruff Hossain ... Wahidunnessa v. Surgadass Wait v. Baker 364, Wajid Khan r. Ewaz Ali Wake v. Harrop Wakefield r. Ne wbon Waldy v. Gray Walker, Re Walker r. Hirsch Walkers, Winser, & Hamm v. Shaw Limitation, XV. of 1877, s. 19 52, 158 s.20 446,512 art. 57 512 art. 59 455, 485 art. 60 485 art. 115 512 art. 145 513 Limitation Act, 1908, s. 3 277 >i. Sched. I., art. 106... 660 it. Sched. I., art. 114... 277 n. Local Act, No. 1 of 1900, s. 47... 281 Lotteries, V. of 1844 (rep.) 195 Madras Civil Courts, III. of 1873, s. 16 5 Madras Regulation, II. of 1802, s. 17 5 Majority, IX. of 1875, ss. 2, 3 ... 54 s. 2 73 s. 64 55, 56 ss.2, 10... 55 Married Women's Property, III. of 1874, ss. 4, 7 60, 522 Merchandise Marks, IV. of 1889, s. 17 422 Merchant Shipping, I. of 1859... 7 , V. of 1883... 7 Municipal, Bombay, II. of 1884, s. 30... 273, 282 -, Madras, IV. of 1884 341 ,Oudh,XV.ofl883,s.40 281 Negotiable Instruments, XXVI. of 1881 7, 350 s. 4 179?*. s.20 67,70 s.27 521 74.. 591 s.28 590 s.39 469 s. 58 417 s. 82 275 ss. 87 89 270, 271 s. 90.... , 275 PAGE Negotiable Instruments, XXVI. of 1 881 continued. B. 105 238 s. 113 225 s.114 471 s. 118 154 Paper Currency, XX. of 1882, s. 16 215 , VI. of 1903,8.2 215 Penal Code, XLV. of 1860, s.23 72 s.40 417 s. 52 417 ss. 213,214 131 s. 269 256 s. 294 (a) 180 s. 403 298 (Amendment), XXVII. of 1870, s. 10 195 s. 294 195 Policies of Insurance, V. of 1866 7 Powers of Attorneys, VII. of 1882 526 Probate and Administration, V. of 1881, s.89 204 Provincial Insolvency, 1907 209 Railways, IX. of 1890, s. 55 509 s.3,cl.6...490. ss. 72, 73 381, 490, 498 n. s.76 491 Registration, III. of 1877, s.17 52 s. 32 520 s. 49 52, 265 Rent Recovery, Bengal, X. of 1859, s. 10 120 . N.-W.P.,XVIII. of 1873,8. 9... 122 , XI I. of 1881, 122 s 34 319 Revenue, N.-W . P., XIX. of 1 873, s. 125 122 Securities, XIII. of 1886, s. 5 ... 237 Specific Relief, I. of 1877, s. 13 108,256,371 s. 14 100,219 s. 16 104, 257 s. 18 99 s. 19 (a) of 1872 104 s.21 176, 177, 178 s. 21 (b) 206 s. 24 219 s. 25 162 s. 26 (a), (b), (c) 103, 108 s. 26 (e) 264 s. 28 (a) 103, 108, 161, 162 s. 28 (b) 103 s.31 103, 108 s. 35 (a) 103, 104, 144 s. 35 (b) 280 s. 38 104, 276 s.41 56,276 s. 57, illust. (d) 166 s. 57, illust, (e) 165 s. 65 108 Stamp Act, II. of 1899 159 ACTS OF THE GOVERNOR-GENERAL OF INDIA. Ivii PAGE Succession, X. of 1865,s. 2 60 s. 4 60 s.256.. .107, 341 s. 268 ... 204 s. 331 ... 60 Tenancy, Agra, II. of 1901, s. 21 122 Transfer of Property, IV. of 1882 7 s.2, cl.(h) 121 s. 3 488 s. 4 10,147, 154, 281 s. 6(e) 133 s. 6 (f), (h) 121, 143,144 ss. 25 34 201 s. 35 276 s. 49 439 n. s. 53 91, 125,162 P. 54 52, 154, 344, 371 s. 55 90 s. 55 (g) 98 n. s. 55(5) (c) 371 s. 58 268 n. s. 59 52 s. 76, cl. (a) 492 s. 86 7, 302 s. 88 7 s. 107..., 52 PAGE Transfer of Property, IV. of 1882 continued. s. 108 256, 280,281 s. 118 344 s. 123 52 s. 127 628 s. 130 207 s. 137 418 . ch. viii 265 ,11. of 1900 207 Trusts, II. of 1882, ss. 3, 4 144, 147 s. 5 52 s. 47 532 s. 53 78 ss. 5154 ... 560 s. 64 417 ss. 6365 ... 498 s. 66 496 s. 67 632 s. 84 280 Usury, XXVIII. of 1855 7 s. 2. ..328, 334, 335, 336, 337 Wagers, XXI. of 1848 (rep.) 187, 194 . , Bombay, III. of 1865, ss. 1, 2 187 BEFERENCES AND ABBEEVIATIONS. [In citing Indian cases the names of parties are necessarily given as they appear in the report. The capricious and often barbarous variations in the usage of the different High Courts make it difficult to avoid minute errors in reproducing them, but it is hoped that, if any have escaped revision, they are not such as to cause any trouble in identifying the oases.] Anson on Contract, llth ed. 1906. Chalmers, Sale of Goods Act, 1893, 5th ed. 1902. Dicey, Conflict of Laws, 2nd ed. 1908. Finch, Sel. Ca., A selection of cases on the English law of contract, by G. B. Finch, 2nd ed. 1896. Harriman on Contract, 2nd ed. (Boston, Mass.), 1901. Langdell, A Summary of the Law of Contracts, by C. C. L., 2nd ed. (Boston, Mass.), 1880. L. Q. E. Law Quarterly Review, cited by volume and page. Leake on Contracts, 5th ed. 1906. Lindleyon Partnership, 7th ed. 1905. Pollock on Contract, 7th ed. 1902. Pollock on Partnership, 8th ed. 1905. E. R., The Revised Eeports. Sm. L. C., Smith's Leading Cases, llth ed. 1903. Stokes, Whitley Stokes, The Anglo-Indian Codes. 1887. ADDENDA. P. 101, 1. 18: For "just possible" read "not altogether improbable": see Mahomed Kala Mea v. Harperink (1908) L. R. 36 Ind. Ap. 32, which suggests, though it does not decide, that the exception to s. 19 will be applied if possible in a sense consistent with the English rule. At all events a buyer at a sale under the direction of the Court is entitled to rely on statements made by the auctioneer in the presence and hearing of the chief clerk in charge, which he has no means of checking on the spot, though he might have corrected them if he had made independent inquiries. The reading out of conditions in English does not constitute means of discovering the truth for a buyer who does not understand English. This was a remarkable case, the judgment below (Chief Court of Lower Burma) being described by the Judicial Committee as a lamentable miscarriage of justice : L. It. 36 Ind. Ap. at pp. 35, 36, 37. S. 20, p. 107, footnote (jj) : Substitute " 35 Gal. 955, L. R. 35 Ind. Ap. 109," for "12 Cal. W. N. 802." S. 23, p. 126, 1. 26: Add after the words "cannot be recovered": Likewise money advanced by the plaintiff to the defendant to enable the defendant to continue cohabitation with a dancing girl cannot be recovered back : Pannichand v. Nanoo San her (1908) 18 Mad. L. J. 456. S. 23, p. 126, footnote (#) : Add Sani Muncharam v. Regina Stanger (1908) 32 Bom. 581, at p. 586 et seq. S. 23, p. 139 : It has recently been held by a Full Bench of the Madras High Court that an agreement to make a payment to a father in consideration of his giving his daughter in marriage is immoral and opposed to public policy within the meaning of this section : VenJcata Kristnayya v. Lakxhmi Narayana (1908) 18 Mad. L. J. 403. S. 23, p. 142, 1. 3 from bottom: Add after the words "opposed to public policy " : And it has recently been held by the High Court of Calcutta that " if a person enters into a contract with a public servant which he knows casts upon the public servant duties which may conflict with the duties he owes to the public such contract is void " : The Sitarampur Coal Co., Ltd. v. Collet/ (1908) 13 Cal. W. N. 59. Ixii ADDENDA. S. 24, p. 147, footnote (kk), Laxmanlal v. Mulshankar : Substitute " 32 Bom. 449 " for " 10 Bom. L. R. 553." S. 25, p. 151, 1. 3 : Add in a footnote after the words " followed by the Indian Courts" : see Olati Pulliah Chetti v. Varadarajulu (1908) 31 Mad. 474, at pp. 47G, 477. S. 25, p. 159, 1. 1 : Add after the words "or to a promise " : The Court has in each case to consider the language of the document which is the basis of the suit : see Gobind Das v. Sarjn Das (1908) 30 All. 268. THE INDIAN CONTRACT ACT (ACT IX OF 1872). WHEREAS it is expedient to define and amend certain parts of the law relating to contracts : It is Preamble hereby enacted as follows : PRELIMINARY. 1. This Act may be called the Indian Contract Act, Short title. 1872. Extent. It extends to the whole of British India ; Commencement, and it shall come into force on the first day of September, 1872. The enactments mentioned in the schedule hereto are Enactments re- repealed to the extent specified in the third column thereof ; but nothing herein contained shall affect the provisions of any Statute, Act or Kegulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, (a) not inconsistent with the provisions of this Act. Law anterior to Contract Act ; Introduction of English Law into India. The charters of the eighteenth century which established Courts of justice (&) for the three presidency towns of Calcutta, Madras, and Bombay, () The words "not inconsistent with by the Supreme Court in 1773, and finally the provisions of this Act " are not to be by the High Court in 1862. The Mayors' connected with the clause " nor any usage Courts in Madras and Bombay were re- or custom of trade" : Irrawaddy Flotilla placed, in 1797, by the Recorders' Courts. Co. v. Jtugwaiidas (1891) L. R. 18 Ind. Ap. The Recorder's Court in Madras was 121, 127; 18 Cal. 620, 627. See p. 8, abolished in 1799, and that in Bombay in below. 1823, and a Supreme Court was established (b) These were at first the Mayors' in its stead, which again was superseded Courts, which, in Calcutta, were superseded by a High Court in both places in 1862. I.C. 1 THE INDIAN CONTRACT ACT. S. 1. introduced into their jurisdictions the English common and statute law in force at the time (c) so far as it was applicable to Indian circumstances (d). It is, however, a matter of controversy whether English law was introduced by the charter of 1726 (13 Geo. I.) so as to extend to India the statutes passed up to that date only, or subsequently also by the charters of 1753 and 1774 so as to embrace statutes up to 1774 (e). Introduction of native Law of Contract into India. The indiscrimi- nate application of English law to natives of India within the jurisdiction of the Supreme Courts led to many inconveniences (/). To obviate this, the statute of 1781 (21 Geo. III. c. 70, s. 17) empowered the Court at Calcutta (being then the Supreme Court), and the statute of 1797 (37 Geo. III. c. 142, s. 13) empowered the Courts in Madras and Bombay (being then the Recorders' Courts), to determine all actions and suits against the inhabitants of the said towns, provided that their succession and inheritance to lands, rents, and goods, and all matters of contract and dealing between party and (c) Though this view of the introduction of English law into India was pronounced incorrect and unreasonable by the Indian Law Commissioners in their celebrated lex loci Keport of 31st October, 1840, it may now be taken as an accepted doctrine. The Commissioners maintained that neither the Hindu nor the Mahornedan law was the lex loci of British India, as it. was so interwoven with religion as to be unfitted for persons professing a different faith, and they held that, there being no lex loci, the English law became Ipxojure the lex loci when any part of British India became a possession of the British Crown, and binding upon all persons who did not belong to the Hindu or Maho- medan community. They recommended the passing of an Act declaring a lex loci for British India founded on the English law, but the recommendation was never carried into effect. See in this connection Naoroji v. Rogers (1867) 4 B. H. C. 1, 172(5 ; The Indian Cliief (1801) 3 Robin- son Adm. pp. 28, 29, where Lord Stowell showed a much juster understanding than the Indian Law Commissioners of the nature of Asiatic personal law ; and the cases cited in the next note. ( But such cases are very few, and the native law of contract may, for all practical purposes, be regarded as having been superseded by the Contract Act and other enactments relating to particular contracts. Acts and Regulations not expressly repealed. The laws made by the Legislatures for the presidencies of Bengal, Madras, and Bombay, before the date of the Government of India Act of 1833 (3 & 4 Will. IV. c. 85), were known as " Eegulations." The statute of 1833 established a legis- lature for the whole of British India, and the laws made under that statute, and the subsequent enactments modifying that statute, are known as " Acts." As regards the Regulations, it may be stated that a major part of them has been repealed by subsequent Indian legislation. Among the Acts relating to particular contracts and not expressly repealed by the Contract Act may be mentioned the following : Act XXXII of 1839 as to interest, Act XXVIII of 1855 as to usury, Act IX of 1856 as to bills of lading, Act XIII of 1859 as to breaches of contracts by artificers, the Merchant Shipping Acts of 1854 and 1859, Act III of 1865 as to contracts with common carriers, and Act V of 1866 as to assignment of policies of insurance. The Acts enumerated above were passed before the enactment of the Contract Act. Among the Acts dealing with particular contracts and passed after that date may be noted the Negotiable Instru- ments Act XXVI of 1881, the Transfer of Property Act IV of 1882, Merchant Shipping Act V of 1883, Act XXI of 1883 as to contracts with emigrants, and Act IX of 1890 as to contracts with railways. Saving of usage or custom of trade, etc. The term " usage of trade " Vullubhdas (1893) 18 Bom. 227; Gopaly. (u) Annaji Rou v. Ragubai (1883) 6 Gangaram (1895) 20 Bom. 721, overruling Mad. H. C. 400. Shri Ganesh v. Kesliavrav (1890) 15 Bom. (x) Madkwa Sidhanta v. Verikatara- 625 ; Harilal v. Nagar (1896) 21 Bom. 38 ; manjulu (1903) 26 Mad. 662. All Saheb v. Shabji (1895) 21 Bom. 85. (y) Saunadanappa v.SMvbagawa(l9Q7) (*) Nobin Cli/under v. Homes/i CJiunder 31 Bom. 354. (1887) 14 Cal. 781. (yy} Subramania Aiyarv. Subramania (0 Het Narain v. Ram, Deni (1883) 12 Aiyar (1908) 18 Mad. L. J. 245. C. L. R. 590. THE INDIAN CONTRACT ACT. S. 1. is to be understood as referring to a particular usage to be established by evidence, and perfectly distinct from that general custom of merchants which is part of the law of the realm and is to be collected from decisions, legal principles, and analogies, and, according to the better opinion, can still be increased by proof of living general (not merely local) usage (2). Such a usage remains unaffected by the provisions of the Act, even though it may be inconsistent with those provisions. Both the reason of the thing and the grammatical construction of the section require that the words "not inconsistent with the provisions of this Act" should not be connected with the clause " nor any usage or custom of trade," and apply only to the immediately preceding words " nor any incident of any contract." This view was taken by the Judicial Committee in the Irrawaddy Flotilla Co. v. Bugwandas (a). The contrary seems to have been assumed by the Bombay and Calcutta High Courts in two earlier cases (ft). Both these cases were considered by the Judicial Committee in the above case. In both these cases, again, the opinion was expressed by the Bombay and Calcutta High Courts that the liability of a common carrier under the common law of England, which renders him liable for all loss or damage to goods except when caused by the act of God or the King's enemies, was a " usage of trade," the one Court holding that it was inconsistent, and the other that it was consistent, with the provisions of the Contract Act. In the Privy Council case cited above, the Judicial Committee were inclined to the opinion that the liability of a common carrier under the English common law as an insurer of goods was not a usage of trade, but that it was an " incident " of the contract quite consistent with the provisions of the Act. Such an incident is not inconsistent with the provisions of ss. 151 and 152 of the Act, having regard to the words " in the absence of any special contract " occurring in s. 152. All these cases are considered more fully in the notes to s. 151. See also as to "usage of trade " in the case of High Court attorneys s. 171 and In re Mccorkin- dale (c), there cited. Evidence as to usage of trade. In this connection may be noted the provisions of s. 92 (5) of the Indian Evidence Act, 1872, which enacts that, though a contract may be in writing, oral evidence may be adduced to prove any usage or custom by which incidents not expressly mentioned (z) See 1 Smith's Leading Cases, 483 ; (J) Kuverji v. Tlie Great Indian Penin- Beckuanaland EujAoratw* Co. v. London sula Railway Co. (1878) 3 Bom. 109, Trading Sank [1898] 2 Q. B. 658; 113 ; Moothora Kant Shaio v. The India Edelstein v. Scliuler % Co. [1902] 2 K. B. General Steam Navigation Co. (1883) 10 144 ; F. B. Palmer in L. Q. R. XT. 245. Cal. 166, 185. () (1891) L. R. 18 Ind. Ap. 121 ; 18 (<) (1881) 6 Cal. 1. Cal. 620, 627 ; L. R. 18 Ind Ap. 121, 127. USAGE OR CUSTOM OF TRADE. in the contract are usually annexed to contracts of that description, pro- S. 1. vided that the annexing of such incident would not be repugnant to, or inconsistent with, the express terms of the contract. And further such incident should not be inconsistent with the general provisions of the Contract Act, having regard to the words " nor any incident of any contract not inconsistent with the provisions of this Act." This is a reproduction of the English law on the subject (d). As to the evidence necessary to prove a usage of trade, it is enough if it appears to be so well known and acquiesced in that it may be reasonably presumed to have been an ingredient imported by the parties into their contract. To prove such a usage, there needs not either the antiquity, the uniformity, or the notoriety of custom in its technical sense ; the usage may still be in course of growth, and may require evidence for its support in each case(e). See also Evidence Act, s. 13 (b). Sections referring to usage or custom of trade. S. 110 provides that an implied warranty of goodness of quality may be established by the 11 custom of any particular trade." S. 190 enacts that an agent cannot delegate his authority to another unless allowed by the " ordinary custom of trade." Similarly an agent is bound, in the absence of directions from the principal, to conduct business according to " the custom which prevails in doing business of the same kind at the place where the agent conducts such business" (s. 211). It may here be observed that the expression " usage or custom of trade " used in s. 1, as well as the sections referred to above, relates to a particular usage as distinguished from a general or universal usage. A general usage pervading ail trades has no binding force, if it is inconsistent with the provisions of the Act. A general usage is equivalent to a general law, and no general law or usage in contravention of the general law laid down by the Contract Act can be consistent with the validity of the Act itself (/). Choice of law governing contract. It may be doubtful what law is to be applied to decide on the validity or the interpretation of a contract, or both, as where the contract is made in one jurisdiction and to be performed (d) Per Cur. in Brown v. .Z?//?'e(1855) (/) Moothora Kant Shaw v. The India 3 E. & B. 715, 23 L. J. Q. B. 316 ; aud in General Steam Navigation Co. (1883) 10 Humfrey v. Dale (1857) 7 E. & B. 274, 26 Cal. 166, 185. See also Meyer v. Dresser L. J. Q. B. 137, 140. (1863-4) 16 C. B. N. S. 646; 33 L. J. (e) Jiigyomohun Ghose v. Manlcltchand C. P. 289, where Erie, C.J., said : "It is a (1859) 4 W. R. 8, 10 ; 7 M. I. A. 263, 282. contradiction to say the law does not give The allowance of new usage involves ths the right, and yet that there is a univer- possibility of allowing change in previous sally established usage to allow it. A usage : Moult v. Halllday [1898] 1 Q. B. universal usage cannot be set up against 125, 130. the general law." THE INDIAN CONTRACT ACT. Ss. 1, 2. in another, or is sued on in a jurisdiction where it was not made or to be performed. The Act does not deal with questions of this kind. In ordinaiy circumstances the proper law of a contract (to use Mr. Dicey's convenient expression) will be the law of the country where it is made (g). But where a contract is made in one country and to be per- formed wholly or in part in another, the proper law may be presumed to be the law of the country where it is to be performed (A). But these rules are only in the nature of presumptions, and subject to the intention of the parties, whether expressly declared or inferred from the terms and nature of the contract and the circumstances of the case ('). The subject cannot be discussed at large here ; the above rules, however, are settled and willcommonly be found sufficient. Generally the capacity to contract follows the law of domicile at the time of making the contract (&). This of course is a matter of law which the parties cannot alter. A large proportion of the decisions under this head have been in matrimonial causes ; but the special complications arising in questions of marriage and divorce are outside the scope of the present Act and of the ordinary law of contract (I). Act not retrospective. The provisions of this Act do not apply to contracts made before the Act came into force (m). The Transfer of Property Act IV of 1882, s. 4, provides that the chapters and sections of that Act which relate to contracts shall be taken as part of the Contract Act. 2. In this Act the following words and expressions are interpretation use ^ m ^ ne following senses, unless a contrary intention appears from the context. (0) Dicey, Conflict of Laws, 2nd ed., erroneous). Rule 152, sub-r. 3 ; Lloyd v. Guibert (A) LacUmi Nara'm v. Fatah Bahadur (1865) L. R. 1 Q. B. 115, 122 (in Ex. (1902) 25 All. 195; Dicey, Rule 149. Ch., a classical judgment of a very strong (1) See Ogden v. Ogdtn [1908] P. 46, Court delivered by Willes, J.). C. A. (A) Ibid.; Cox v. The Governors of (/) OmdaKhanum v. Brojendro (\1 ) Bishop Cotton's School (1874) Punj. Rec. 12 B. L. R. 451, 458 ; ib. p. 472 (on No. 85. appeal), where A. sued B. upon a contract (1) Dicey, Rule 152, sub-rr. 1 and 2 : executed by B. in 1869 providing for Hamlyn v. Talislter Distillery [1894] payment of interest on the amount of a A. C. 202 is now the leading English loan at the rate of 75 per cent, per annum, authority. And see Abdul Aziz v. On behalf of B. it was contended that the Appayasaml (1903) 27 Mad. 131, 31 I. A. 1 case was governed by the Contract Act, (parties bound according to the law as ss. 73,_ 74, and 75, but the Court intimated they understood and adopted it at the their opinion that the Act had no retro- time, though their interpretation proved spective effect. INTERPRETATION. 1 1 (a) When one person signifies to another his willingness S. 2. to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal : (b) When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal, when accepted, becomes a promise : (c) The person making the proposal is called the " promisor, "and the person accepting the proposal is called the " promisee " : (d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a considera- tion for the promise : (e) Every promise and every set of promises, forming the consideration for each other, is an agreement : (f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises : (g) An agreement not enforceable by law is said to be void : (h) An agreement enforceable by law is a contract : (i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract : (j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. Summary of S. 2. This section is understood to be the work of Sir James Stephen. There is nothing like it in the original draft prepared by the Indian Law Commissioners at home, which only laid down in general terms that " a contract is an agreement between parties whereby a party THE INDIAN CONTRACT ACT. S. 2. engages to do a thing or engages not to do a thing "(). As the section stands, its position and form are open to the remark that it professes to be an interpretation clause, but really declares a considerable part of the sub- stantive law. Moreover, the propositions it lays down are by no means confined to principles of universal jurisprudence, but embody several con- ceptions which are peculiar to the Common Law, or of peculiar importance in it. We learn from els. (a), (b), (c), (e), and (f) that an agreement is a promise or a set of reciprocal promises ; that a promise is formed by the acceptance of a proposal ; and that there must be a promisor who makes the proposal and a promisee who accepts it. In the case of reciprocal promises each party is a promisor as to the promise he makes and a promisee as to that which he receives ; he is both proposer and acceptor, proposing to become liable and accepting the other's liability. The mutual proposals of the two parties become promises by mutual acceptance ; whatever may have happened before the promises are exchanged is merely preliminary negotiation, and does not enter into the legal analysis of the transaction. Proposal and promise. The word "proposal" is synonymous in English use with " offer." But the language of these definitions appears to confine " proposal " to an offer to be bound by a promise. Thus a man who offers to sell and deliver, then and there, existing portable goods in his immediate control, such as a book or a jewel, does not offer a promise but an act, and if the other party takes the goods on the spot and becomes liable to pay for them, he (the buyer) is the only promisor (0). In such a case the seller would seem not to make a proposal within the terms of the Contract Act. But in England no one would hesitate to say that he offers (or proposes, though this word is less usual) to sell his goods. The Act does not say, but it seems to imply, that every promise is an accepted proposal. In the Common Law this is not so, for a binding promise may be made by deed, that is, by writing under seal, without any communication between the parties at all. This is because the deed, as an ancient formal method of proof, was conclusive against its maker. It was introduced at a time when, under the archaic procedure still in force in the eleventh and twelfth centuries, all proof had to be conclusive or nothing. The party's solemn admission that he was bound originally excluded all defence. It still dispenses, in England, with positive proof of any ulterior ground of liability (p). But the practice of executing deeds in the English () S. 1 of draft Second Report of qualification that specific performance of Indian Law Commissioners, 1866, at p. 11. a merely voluntary covenant will not be (, and might, perhaps, have more conveniently followed it. Agreement between parties at a distance. No difficulty arises on the first paragraph. Whether a proposal has or lias not come to the knowledge of the person to whom it was made is purely a question of fact. The rest of the section is intended, as shown by the illustrations, to meet the questions raised by the formation of agreements between parties at a distance. It has done this, as regards acceptance, by enacting (in com- bination with s. 5) that for a certain time namely, while the acceptance' is on its way the receiver shall be bound and the sender not. The proposal becomes a promise before it is certain that there is any consideration for it. This can be regarded only as a deliberate and rather large departure, for reasons of convenience, from the common law rule which requires the promise and the consideration to be simultaneous. No such departure has been found necessary in England. The case of an acceptance being " put in a course of transmission to " the proposer, but failing to reach him, is not expressly dealt with. It seems to result from the language of the second paragraph that the proposer must be deemed to have received the acceptance at the moment when it was despatched so as to be " out of the power of the acceptor," and that accordingly it becomes a promise on which the acceptor can sue, unless some further reason can be found why it should not. If the consideration on the acceptor's part was not promise but performance for example, the sale of goods despatched at the proposer's request without previous negotiation the failure of consideration may supply such a reason in the case proposed. The Act certainly does not say that the intending purchaser must be deemed to have received goods which COMMUNICATION WHEN COMPLETE. 31 have never arrived ; it says at most that he must be deemed to have been S t 4. aware of their despatch. But if the consideration on the acceptor's part was a promise, it would seem that the proposer cannot say he has not received that consideration ; for he cannot say that the acceptance has not been communicated to him, and there is no difference between having the communication of a promise and having the promise itself. Consequently, where the agreement is to consist in mutual promises, a binding contract appears to be formed by a letter of acceptance despatched in the usual way, even if it does not arrive at all, unless the proposal was expressly made conditional on the actual receipt of an acceptance within a prescribed time, or in due course, or unless the" acceptor sends a revocation as provided for by the latter part of the section and explained by illustration (c). This J ast qualification is probably, though not certainly, a departure from English law. Apart from the question of a possible revocation, the total result, on the words of the Act, is in accordance with the existing English authorities. Those authorities, however, are of later date than our Act, and in 1872 the current of opinion was rather the other way. It seems uncertain whether the framers of the Act really omitted to consider the case of an acceptance not arriving at all, or meant it to be an implied exception, on the ground that the want of any final consent between the parties (see s. 10) would prevent the formation of a contract, or how otherwise. The draft of 1866 appears to have assumed that actual communication was necessary (K). When the proposal and acceptance are made by letters, the contract is made at the time when and the place where the letter of acceptance is posted (i). English, rules. The rules as now settled in England are as follows : " A person who has made an offer must be considered as continuously making it until he has brought to the knowledge of the person to whom it was made that it is withdrawn (&). In other words, the revocation of a proposal is effectual only if actually communicated before the despatch of an acceptance ; and the time when the revocation was despatched is (/t) " 3. A proposal to enter into a con- poser before or at the same time with the tract may be retracted, or the terms of it letter or telegram of acceptance, or when altered by the party making it, at any acceptance is to be inferred from the time before it is accepted. circumstances of the case." ''Explanation. A proposal is said to be (<) Kamisetti Subbiak v. Katlia Ven- accepted when an expressed acceptance hatasawmy (1903) 27 Mad. 355. English of it has been communicated to the pro- authority, so far as it goes, is to the same poser, or when a letter of acceptance is effect. posted or a telegraphic message delivered (&) Lord Herschell in Ifenthorn v. at the proper office, and the acceptance by Fraser [1892] 2 Ch. 27, 31, Finch, Sel. Ca. letter or telegram is not cancelled by some 148, confirming Bijrw, v. Van Tienhoven communication which reaches the pro- (1880) 5 C. P. D. 344. THE INDIAN CONTRACT ACT. S. 4. immaterial (/). But where an acceptance, without notice of the offer being revoked, is despatched in due course by means of communication, such as the post, in general use and presumably within the contemplation of the parties, the acceptance is complete from the date of despatch, notwithstanding any delay or miscarriage in its arrival from causes not within the acceptor's control " (m). It seems (ri) this is independent of the rule that, if the proposer of an agreement has prescribed or authorised any particular mode of communicating acceptance (rf. s. 7, sub-s. 2), he cannot dispute the sufficiency of that mode, and must take any risks of delay or miscarriage attaching to the acceptor's action in conformity with the request or authority. A letter of acceptance misdirected by the acceptor's fault cannot be deemed to have been effectually put in a course of transmission to the proposer (6) ; this case was properly distinguished by the Allahabad High Court from that of an insufficient address furnished by the proposer him- self (p). There the proposer's own want of care obviously cannot extenuate, but will if possible aggravate, the risk imposed on him by the general rule of law. Whether a particular letter or writing has been posted, delivered, or actually received by the addressee, is a question of fact having no more to do with the law of contract than any other matter of fact which it may be needful to prove in order to establish or contradict the formation of any kind of contract (q). It is not thought useful for Indian purposes to enter upon the history of the English doctrine, or to discuss the earlier cases, whose results, so far as'not overruled, are embodied in later decisions (r). Revocation arriving before Acceptance. One point remains unsettled in England. It has never been decided whether, a letter of acceptance having been despatched by post, a telegram revoking the acceptance and (0 It is literally possible to read the Grant (1879) 4 Ex. D. 216, Finch, Sel. words of s. 4 of the Act, par. 3, as giving Ca. 133. only one chance of sending a revocation, so () Hentliorn v. Fraser. that if a man first sends a written accept- (o) Ram Das v. Official Liquidator ance by a slow ship, then sends a written Cotton Ginning Co., Ltd. (1887) 9 All. revocation by a faster ship, and then 366, 385. returns to his first mind and confirms the (j>) Townsend's Case (1871) L. R. 13 acceptance by a telegram arriving before Eq. 148. Several dicta in this case are either letter, the revocation is operative, founded on authority since overruled ; the and the confirmation cancelling it is not. decision is good law, though it would now But this cannot be seriously entertained, be put on shorter grounds. and seems sufficiently excluded by the (,/) Cf. Evidence Act, ss. 16 and 114. terms of s. 5. (r) See Appendix to Pollock, Principles (t) Henthorn v. Fraser, note (k) above ; of Contract, 7th ed. p. 680. Household Fire, etc., Insurance Co. v. REVOCATION OF PROPOSALS. 33 arriving before the letter is operative or not. A negative answer seems to Ss. 4, 5. be required by the reasoning of the English decisions (s). If it can be said that every acceptance in writing is subject to an implied condition that it may be cancelled by a revocation arriving sooner or at the same time, it might as easily be held that every proposal expecting an answer by letter includes a condition that the answer shall actually be received in due course. But this suggestion has been definitely rejected. In British India, however, such a revocation is made valid by the express terms of ss. 4 and 5 of the Act (t). 5. A proposal may be revoked at any time before the Revocation of communication of its acceptance is complete proposals and . acceptances. as against the proposer, but not atterwards. An acceptanjce may be revoked at any time before the communication of the acceptance is^cpm^lejte as against the acceptor, but not afterwards. Illustration. A. proposes, by a letter sent by post, to sell his house to B. B. accepts the proposal by a letter sent by post. A. may revoke his proposal at any time before or at the moment when B. posts his letter of acceptance, but not afterwards. B. may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A., but not afterwards. Revocation of Offers. It is implied in this section that the proposer of a contract cannot bind himself (unless by a distinct contract made for a distinct consideration) to keep his offer open for any definite time, and that any words of promise to that effect can operate only for the benefit of the proposer and as a warning that an acceptance after the specified time will be too late (s. 6, sub-s. 2). Such is undoubtedly the rule of the Common Law. The reason is that an undertaking to keep the offer open for a certain time is a promise without consideration ; and such a promise is unenforceable. A. gives an undertaking to B. to guarantee, for twelve months, the due payment of M.'s bills, which may be discounted by B. at A.'s request. This is not a binding promise, but a standing proposal (si) See especially the judgment of Scottish decision which is apparently still Thesiger, L.J., in Household Fire Imur- followed in Scotland : Countess of Dun- ame Co. v. Grant, i Ex. Div. at p. 222, more v. Alexander (1830) Finch, Sei. Ca. Finch, Sel. Ca. at p. 137. 120. This is under a different system of (t) The Indian rule agrees with a law. i.e. 3 THE INDIAN CONTRACT ACT. S. 5. which becomes a promise or series of promises as and when B. discounts bills on the faith of it. A. may revoke it at any time, subject to his obligations as to any bills already discounted. " The promise " or rather offer "to repay for twelve months creates no additional liability on the guarantor, but, on the contrary, fixes a limit in time beyond which his liability cannot extend " (u). Z. offers to take A.'s house on certain terms, an answer to be given within six weeks. A. within that time writes Z. a letter purporting to accept, but in fact containing a material variation of the terms (see s. 7, sub-s. 1, below) ; Z. then withdraws his offer ; A. writes again, still within the six weeks, correcting the error in his first letter and accepting the terms originally proposed by Z. No contract is formed between Z. and A., since A.'s first acceptance was insufficient, and the proposal was no longer open at the date of the second (x). On the same principle it was held by the High Court of Madras that a proposal to sell goods allowing eight days' time for acceptance may be revoked within the eight days unless the promise to keep the offer open was supported by consideration (y). Sale by Auction, etc. The liberty of revoking an offer before accept- ance is well shown in the case of a sale by auction. Here the owner of each lot put up for sale makes the auctioneer his agent to invite offers for it, and " every bidding is nothing more than an offer on one side, which is not binding on either side till it is assented to." Hence a bidder may withdraw his bid at any moment before the fall of the hammer (2). It is common to insert in conditions of sale a proviso that biddings shall not be retracted, but it seems that such a condition is inoperative in law (a), for a one-sided declaration cannot alter the bidder's rights under the general law, nor is there any consideration for his assenting to it, even if he could be supposed to assent by attending the sale with notice of the conditions. The English rule that a bid may be withdrawn at any time before the (M) Offord v. Danes (1862) 12 C. B. supposed that on the acceptance of a N. S. 748, Finch, Sel. Ca. 87. The much- proposal it is necessary for the proposer to discussed earlier case of Cooke v. Oxley make some fresh declaration of consent, (1790) 3 T. R. 653, Finch, 85, is now which is contrary both to principle and received authority only so far as it to all recent authority, decides this. See Stevenson v. McLean, (x) Rovtledge v. Grant (1828) 4 Bing. (1880) 5 Q. B. D. 346, 351 ; and Head v. 653, 29 R. R. 672. Diggoti (1828) 3 M. & R. 97 (in which the (y) Schonlank v.. Muthunagana Chctti parties were face to face, and it is not (1892) 2 Mad. L. J. 57. clear whether the defendant did or did (z) Payne v. Care (1789) 3 T. R. 148, not signify his "revocation before the 1 R. R. 679. plaintiff signified his acceptance) cannot (a) Such was Lord St. Leonards' be taken as going farther. The reason opinion : Dart, V. & P. 6th ed. i. 139. there given is clearly wrong, for it is STANDING OFFERS. 35 fall of the hammer is followed in British India (ft). When the bid of an S. 5. agent at an auction sale was accepted by the auctioneers Icutclia-pucca (subject to sanction of the owner of the goods), and the agent agreed thereto, it was held that this did not preclude the principals of the agent from exercising their right of retracting the bid before it was accepted by the auctioneers (c). In this case an attempt was unsuccessfully made to prove a usage of trade according to which, if a bid were accepted kutcha- pucca, the bidder could not retract it until it had been finally accepted or refused. If such a usage were established, it would have been, no doubt, inconsistent with the terms of the present section. But, so far as the express enactments of the Act are concerned, such a usage is saved by the last clause of s. 1. It would remain to be seen whether it would not be disallowed as contrary to the general principles of the law. Standing Offers. A writing whereby A. agrees to supply coal to B. at certain prices and up to a stated quantity, or in any quantity which may be required, for a period of twelve months, is not a contract unless B. binds himself to take some certain quantity, but a mere continuing offer which may be accepted by B. from time to time by ordering goods upon the terms of the offer. In such a case, each order given by B. is an acceptance of the offer ; and A. can withdraw the offer, or, to use the phraseology of the Act, revoke the proposal, at any time before its accept- ance by an order from B. (d). Such a transaction may be reduced to a statement by the intending vendor in this form: "If you will send me orders for coal, I shall supply it to you for a period of twelve months at a particular rate." This is merely a proposal from A. to B. If, in reply to such a proposal, B. says to A., " I agree," it does not constitute an accept- ance of the proposal. An acceptance can take place only by B. sending an order to A. If, however, there is an undertaking on the part of B. not to send orders for coal (or whatever the goods in question may be) to any other person than A. during a specified time, there is a good consideration for a promise by A. to supply such coal as B. may order on the specified terms and up to the specified extent. The same principle has been affirmed by the Judicial Committee on an appeal from the Province of Quebec, where French-Canadian law, now codified, is in force. A printer covenanted to execute for the Government of the Province, during a term of eight years, the printing and binding of certain public documents on certain terms expressed in a schedule. In the course of the same year the (&) Agra Jianlt v. Hamlin (1890) 14 Wadia $ Co. (1899) 24 Bom. 97, following Mad. 235. G. N. II. Co. v. William (1873) L. R. 9 (0 Macltenz'tev. 6Vti/w (1889) 16Cal. C. P. 16, Finch, Sel. Ca. 370; Kundan 702. Lai v. Secretary of State for India (1904) (d) The Bcmjal Coal Co. v. Homee, 1'unj. Eec. lio. 72. 32 36 THK INDIAN CONTRACT ACT. Ss. 5, 6. Lieuteuant-Governor cancelled the agreement. The printer sued the Crown by petition of right, and it was ultimately held, reversing the judgment below, that he had no ground of action. " The contract . . . does not purport to contain any covenant or obligation of any sort on the part of the Crown. The respondent under- takes to print certain public documents at certain specified rates. For all work given to him on the footing of the contract the Government was undoubtedly bound to pay according to the agreed tariff. But the contract imposes no obligation on the Crown to pay the respondent for work not given to him for execution. There is nothing in the contract binding the Government to give to the respondent all or any of the printing work referred to in the contract, nor is there anything in it to prevent the Government from giving the whole of the work, or such part as they think fit, to any other printer " (e). In another similar case in England, where a town council had accepted a tender for the supply of certain goods for twelve months, a Divisional Court held that a contract was formed by the acceptance of the tender (/). One of the Judges thought there was an implied obligation on the council's part not to order goods of that kind elsewhere during the term. The case before the Judicial Committee which we have just mentioned was not cited. Unless some sufficient distinction can be discovered in the facts (which the present writer has failed to do), it is submitted that this judgment is contrary to both principle and authority, and ought not to be followed. Advertisements of rewards and other so-called " general offers " have also raised questions whether particular acts were proposals of a contract capable of being promises by acceptance, or merely the invitation of proposals. This will be more conveniently dealt with under s. 8. 6. A proposal is revoked Revocation (1) ^J *ke communication of notice of how made. revocation by the proposer to the other party ; (2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, (e) R. v. Demurs [1900] A. C. 103. 108. in a curious manner, the question being English authorities on the point (which whether the tradesman had an interest in in the Province of Quebec could have a contract with the council (apart from only a " persuasive" authority) were not any goods being actually ordered) which referred to. disqualified him for election as a town (/) Gloucester Municipal Election Petl- councillor. tion [1901] 1 K. B. 683. The point arose NOTICE OF REVOCATION. 37 by the lapse of a reasonable time, without com- S. 6. munication of the acceptance ; (3) by the failure of the acceptor to fulfil a condition precedent to acceptance ; or (4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. Notice of Revocation. Here sub-s. 1 appears to make ifc a condition of revocation being effectual that ifc shall be communicated by the proposer or (which is the same thing) by his authority. This was probably intended to correspond with the law of England, but a few years after the Act was passed the Lords Justices James and Hellish in Dickinson v. Dodds (g) used language apparently involving a different rule, though that case actually decided only that if an owner of immovable property makes a proposal to sell it to one man, and before that proposal is answered agrees to sell it to another, and the first, with the knowledge of this fact, then formally tenders an acceptance, the purchaser who first actually accepts has the better right to specific performance. It was not decided, though the Judges seem to have thought, that knowledge, not communicated by the proposer, that the property was sold to some one else, was such a revocation of the first proposal as in itself made acceptance by the person to whom it was made impossible. Acceptance of a proposal which the proposer has made it impossible to fulfil is not necessarily unmeaning or inoperative ; the fact that an obligation cannot be specifically performed is consistent with the promisor being bound to pay damages for his default. Many obligations are from the first incapable of specific performance so far as any power of the Court is concerned. It would be absurd to hold that a promisor is to go scot-free because by his own action he has reduced the possibilities of his obligation from a higher to a lower level. The reasons given for the decision in Dickinson v. Dodds have been freely criticised in England; but, as the decision itself is not of positive authority in British India in a matter covered by the terms of the Contract Act, ifc does not seem useful to pursue the discussion here. The true principle of such cases is stated by Professor Langdell (Ji) : " An offer to sell property will not be revoked by a sale of the property to some one else. As evidence of a change of mind on the part of the offerer, such an act cannot be put higher than a letter of revocation sent to the offeree by mail ; and yet it is well () 2 Ch. Div. 463. (//,) Summary of the Law of Contracts, Boston (Mass.), 1880, s. 181. 38 THE INDIAN CONTRACT ACT. S. 6. settled that a letter of revocation will not be operative until it is received by the offeree (?'). Nor will the subsequent sale of the property to some one else constitute any legal obstacle to the continuance of the offer. The original offeree and the subsequent purchaser cannot, indeed, both acquire the property, but they can both acquire a right to it as against the seller, together with the alternative right to damages ; and this is all that a contract secures to one in any case." It has, indeed, been suggested by writers entitled to respect (Jc) that an act of the proposer inconsistent with his original intention will be operative, if it comes in any way to the know- ledge of the offeree, as an act which, under s. 3, "has the effect of communicating" a revocation of the proposal. If this were so, Dickinson v. Dodds would be good law in British India to the full extent of the reasons there given. But, with all submission, the act of selling to one man property already offered to another cannot be itself an act which has the effect of communicating notice to that other. Such notice must be the effect of some other act or event. As in Dickinson v. Dodds, a stranger may inform the original offeree that the new transaction, or some such transaction, has taken place. This is no act of the party supposed to be revoking, and therefore its effect, if any, cannot depend on the words of s. 3. It is perhaps needless to consider what would be the result if the first offeree in person were to overhear a conversation between the vendor and the new purchaser constituting an agreement inconsistent with the first offer. We have already expressed a doubt whether the true meaning of s. 3 was to ascribe the effect of communicating proposal, revocation, or acceptance, to acts done without any such intent. On the whole, we are unable to follow the learned commentators to whose interpretation we have referred. Revocation not presumed. As Lord Justice James said, "prima facie every contract is permanent and irrevocable, and it lies upon a person who says that it is revocable or determinable to show either some expression in the contract itself, or something in the nature of the contract, from which it is reasonably to be implied that it was not intended to be permanent and perpetual, but was to be in some way or other subject to determination " (/). (I) A cheque is not effectually counter- 949. Accordingly, where a contract was manded by a telegram delivered at the made between the widow of a Gayawal bank on which it is drawn but not in fact priest and the defendant whereby the brought to the banker's notice : Curtice widow adopted the defendant, a married v. London City $ Midland Bank [1908] man, as her son in order that the defen- 1 K. B. 293, C. A. dant may get his feet worshipped by the (k) Cunningham and Shephard's Indian clientele of her deceased husband and Contract Act, 9th ed. p. 25. receive emoluments from them for the (1) Llanelly Ry. and Dock Co. v. benefit of himself and the widow, and the L. 4- N. W. E. Co. (1873) L. R. 8 Ch. 942, contract itself specified the circumstances REVOCATION NOT PRESUMED. 39 This dictum, and the Indian case cited in our note, really belong to the S. 6. subject of interpretation, in cases where it is alleged that an option to deter- mine a completed contract is conferred by the terms of the contract itself. But the principle that an intent to revoke what has once been deliberately uttered will not be lightly presumed or too readily inferred appears to be equally applicable to proposals. Moreover, the Act does not explicitly deal with interpretation anywhere. The Lord Justice went on to point out that many contracts, those of employment, agency, and the like, are by their nature not expected to be of indefinite duration. The agreement before him was an agreement for running powers between two railway companies. Lapse of time for Acceptance. The rule laid down by sub-s. 2 is now elementary. We have already had to cite some of the authorities which recognise it. On the point of an acceptance after the expiration of a reasonable time being too late, there is one direct English authority, where it was held that a person who applied for shares in a company in June was not bound by an allotment made in November (m). In a recent English company case an underwriting letter contained the words "This engagement is binding on me for two months" ; they were incapable of operating as a promise, and it was held, with some doubt, that their real effect was an offer with a limit of two months for acceptance (ri). Condition precedent to Acceptance. As to sub-s. 3, it is not very easy to see what a condition precedent to acceptance means. The words (like several other of the less felicitous phrases in the Act) appear to have been borrowed without much reflection from the draft Civil Code of the State of New York, completed in 1865 and never adopted in its own State. There is nothing in the original context to throw light on them. A man proposing a contract may request either a single act, or several acts, or a promise or set of promises, or both acts and promises, as the consideration for a promise which he offers. The other party may do something obviously inconsistent with performing some or one of the things requested. This amounts to a tacit refusal, and accordingly the proposal is at an end (see p. 34, above), and the parties can form a contract only by starting under which it might be cancelled, it was may be terminated, and it is impossible held that, though the adoption was invalid, to hold that the parties intended that the the contract was not determinable at the contract should be terminable merely at mere choice of the widow so as to affect the option of one of the parties": the rights created thereby in favour of the Lachmi Dal Mohutain v. Kissen Lall defendant. The Court said: "We are (1906) 11 C. W. N. 147, citing James, unable to accept the suggestion that the L.J., as above. contract in this case was a contract of (/) llamsgate Victoria Hotel Co. v service, terminable upon reasonable 3fontejiore (186fi) L. R. 1 Ex. 109. notice. The contract itself indicates () Illndley's Case [189fi] 2 Ch. 121, some of the circumstances under which it C. A. 40 THE INDIAN CONTRACT ACT. Ss. 6, 7. afresh. If the fact amounts to a refusal, there is no manifest reason for calling it failure to fulfil a condition precedent. The term is not used in this connection in English books. Everything required on the acceptor's part to complete an acceptance would rather seem to be part of the accept- ance itself. This sub-section does not appear to have been judicially interpreted, or indeed to have any very material effect. Death or insanity of proposer. The provision made by sub-s. 4 is quite clear. It is a variation from English law, where on the one hand it is understood that " the death of either party before acceptance causes an offer to lapse," without any qualification as to notice, and on the other hand it does not seem that supervening insanity of the proposer operates as a revo- cation at all, since the contract of a lunatic is only voidable and not void. If an offer is addressed to a man who dies without having accepted or refused it, his executors have no power to accept it either in England or in British India. For the proposer cannot be presumed to have intended to contract with a deceased person's estate. This is very different from the case of one who accepts a proposal without knowing that the proposer is dead. 7. In order to convert a proposal into a promise, the Acceptance must acceptance must (1) be absolute and unqualified ; (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal pre- scribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise ; but if he fails to do so, he accepts the acceptance. Certainty of Acceptance. The rule of the first sub-section is in itself obviously necessary, for words of acceptance which do not correspond to the proposal actually made are not really an acceptance of anything, and, therefore, can amount to nothing more than a new proposal, or, as it is frequently called, a counter-offer. The difficulties which occur under this head are difficulties not of principle but of construction, the question being in every case whether a particular communication is to be understood as a real and absolute acceptance, or as introducing a condition or qualification CERTAINTY OF ACCEPTANCE. 41 which makes it only a stage in a course of negotiation capable of leading, S. 7. but not necessarily leading, to a concluded contract. Sometimes additional words that seem at first sight to make the acceptance conditional are no more than the expression of what the law implies, as where in England an offer to sell land is accepted " subject to the title being approved by our solicitors." The reasonable meaning of this appears to be not to make a certain or uncertain solicitor's opinion (which might be arbitrary) final, but only to claim the purchaser's common right of investigating the title with professional assistance and refusing to complete if the title proves bad (0). On the other hand, reference to special conditions not known to the other party ( p), as distinguished from terms already made part of the proposal (#), will prevent an acceptance from being final. So will a reference to future unspecified terms " to be arranged," or the like, between the parties or their agents (;). But an acceptance on condition, coupled with an admission that the condition has been satisfied, is in effect unconditional. Thus a policy of insurance expressed to be subject to the payment of premium, but reciting that the premium has been paid, is a complete and binding contract, and the insurers cannot avoid it by showing that the payment has in fact not been made (s). Although there can be no contract without a complete acceptance of the proposal, it is not universally true that complete acceptance of the proposal makes a binding contract ; for one may agree to all the terms of a proposal, and yet decline to be bound until a formal agreement is signed (/), or some other act is done. This is really a case of acceptance with an added condition, but of such special importance as to call for separate mention. There may be an express reservation in such words as these : " This agreement is made subject to the preparation and execution of a formal contract " (). ' Or a proposal for insurance may be accepted in all its terms, but with the statement that there shall be no assurance till the first premium is paid. Here again there is no contract, but only a counter- offer, and the intending insurer may refuse a tender of the premium if 00 Ilustey v Home-Pay ne (1879) 4 Q.B.I 11,0. A. App. Ca. 311, 822, per Lord Cairns. The (t) " If to a proposal or offer an assent decision of the C. A., who had taken a be given subject to a provision as to a different view on this point, was affirmed contract, then the stipulation as to the on other grounds. contract is a term of the assent, and there O) Jones v. Daniel [1894] 2 Ch. 332. is no agreement independent of that (0. who was for that purpose constituted the MANNER OF ACCEPTANCE. 45 that some other mode of acceptance which is not according to the terms of Ss. 7, 8. the proposal will do as well. The present sub-section, however, throws on the proposer the burden of notifying to the acceptor that an acceptance not in the prescribed manner and form is insufficient, and he remains bound if he fails to insist on an acceptance such as he required. No previous or subsequent authority for this has been found in the common la\v, nor does analogy seem to favour it. At all events, one party to a negotiation cannot impose on the other the burden of expressly refusing either an original offer or a counter-offer bysaying that he will assume acceptance unless he hears to the contrary (/). Assent to his terms is a positive act within the other party's discretion, and he has no right to presume it. Neglect to answer a business offer is certainly not, as a rule, prudent or laudable ; still there is no legal duty to answer at all. 8. Performance of the conditions of a proposal, or the Acceptance by acceptance of any consideration for a reciprocal tS^roSrins P r o m ise which may be offered with a proposal, is an. acceptance of the proposal. General Offers. The terms of this section are very wide. Nothing like them occurs in the original draft of the Indian Law Commissioners, nor, so far as known to us, in any authoritative statement of English law. They appear to have been taken from the draft Civil Code of New York, with slight verbal alteration. In the absence of illustrations, their intended scope is not very clear. It seems, however, fairly certain that the division of the subject-matter of the section into two branches, " performance of the conditions of a proposal " and " acceptance of any consideration for a reciprocal promise which may be offered with a proposal," corresponds to the general division of proposals into those which offer a promise in exchange for an act or acts and those which offer a promise in exchange for a promise. We have already noted on s. 2 (a) and (b) (p. 12, above) that the word proposal, as defined by the Act, seems to be limited to the offer of a promise. Accordingly " performance of the conditions of a proposal" seems to be nothing else than doing the act requested by the proposer as the consideration for the promise offered by him, as when a tradesman sends goods on receiving an order from a customer. The only previous definition of acceptance in the Act is that a proposal is said to be accepted when the person to whom it is made "signifies his assent thereto" (s. 2 (b)). This has to be read with the provisions as to communication (1) Felt house v. lilndlc-ij (1862) 11 llajl Mahomed, v. Sj>l niter (1900) 24 Bom. C. B. N. S. 869, Finch, Sel. Cu. 51. Cp. 510, 524. THE INDIAN CONTRACT ACT. S. 8. in 8S. 4 and 7. So fur there might have been donbt whether acceptance can ever be binding without communication ; and, indeed, the present section does not expressly dispense with communication in any case. Nevertheless it appears, in its first branch, to recognise the fact that in the cases in which the offerer invites acceptance by the doing of an act " it is sometimes impossible for the offeree to express his acceptance otherwise than by performance of his part of the contract " (m). The most obvious example is where a reward is publicly offered to any person, or to the first person, who will recover a lost object, procure certain evidence, or the like. Here the party claiming the reward has not to prove anything more than that he performed the conditions on which the reward was offered, which conditions may or may not include communication by him to the proposer. In the simple case of a reward proposed for something in which the proposer has an obvious interest, there is not likely to be any other question than what the terms were, and whether they have been satisfied by the claimant. But analogous or seemingly analogous cases may be less simple. There may be questions whether the offer was sufficiently certain, or whether it was intended, or could reasonably be taken, as the offer of a contract at all. In England an open letter of credit authorising the addressee to draw on the issuer to a specified extent, and requesting " parties negotiating bills under it to endorse particulars," has been held to amount to a general invitation or request to advance money on the faith of such bills being accepted, and to constitute a contract with any one so advancing money while the credit remained open (n). This is undoubted law, but the same cannot be said of the judgments which have held (in the circumstances, not quite decisively) that when a sale by auction is advertised as without reserve the auctioneer makes a general offer to bidders, which becomes a binding promise to the highest bond fide bidder, and gives him a right of action " as upon a contract that the sale shall be without reserve " (0) ; and that a railway company's time-table is a general proposal to run trains according to the table, which is accepted by an intending passenger tendering the price of a ticket ( p). These last-mentioned cases, at any rate, mark the (*) Anson, Law of Contract, c. 1, s. 5, without reserve. Probably courts of first p. 29, llth ed. instance in England are bound to follow (.) BA- Agra a/id MasttermuiCs Bank, this case. See Johnston v. Boyex [1899] Ex jjarte Asiatic Banking Corporation 2 Ch. 73, 77. (1867) L. E. 2 Ch. 391, Finch, S. C. 40. O) Dettton v. G. N. E. Co. (1856) 5 (V) Warlow v. Harrison (185!)) 1 E. & E. & B. 860. Finch, S. C. 21. It was also E. 309, Ex. Ch., Finch, S. C. 16. Two held that an action for deceit would lie members of the Court preferred to say on the facts. This opinion is not easy to that the auctioneer was liable as on a reconcile with later authorities. See warranty that he had authority to sell Pollock on Torts, 8th ed. 297. GENERAL OFFERS. 47 extreme limit of effective proposals of a contract as distinguished from the S. 8. invitation of proposals by a general statement of the terms on which one is minded to do business. It has been held, on the other hand, that when particular goods are advertised for sale by auction the auctioneer does not contract with any one who attends the sale, intending to purchase those goods, that they shall be actually put up for sale (q) ; and that an advertise- ment for tenders for goods to be sold is not a proposal capable of being a contract to sell to the highest bidder, but " a mere attempt to ascertain whether an offer can be obtained within such a margin as the sellers are willing to adopt " (r). In some cases the difficulty of ascertaining the acceptor, if the announcement is treated as a proposal, is enough to dispose of the question. A second-hand bookseller's catalogue is not a series of offers, but only invitation of offers ; for if the catalogue had the effect of proposing a sale of every book to the first person who paid or undertook to pay the marked price, the bookseller would be bound to decide at his peril, as between practically simultaneous applicants, whose acceptance was first in order of time, and this might involve obscure matters of both fact and law. Clearly the bookseller does not mean to tie his hands in this way, nor can any reasonable customer suppose that he does. In fact, interpretation must be largely guided, in this class of transactions, by business usage and common sense. Where the acceptance of a proposal consists of the performance of the condition of the proposal, the contract is made at the place where the condition is performed (s). Acting on Offer when sufficient Acceptance. The nature of the acceptance required in these cases was considered by the English Court of Appeal in Carlill v. Carbolic Smoke Ball Co. (t). The defendant company, being the proprietor of the " carbolic smoke ball," a device for treating the nostrils and air passages with a kind of carbolic acid snuff, issued an advertisement offering 100 reward to any person who should contract influenza (or similar ailments as mentioned) after having used the ball as directed. It was also stated that 1,000 was deposited with a named bank, "showing our sincerity in the matter." The plaintiff bought one of the smoke balls by retail, did use it as directed, and caught influenza while she was still using it. Hawkins, J. (), held in a considered judgment that she was entitled to recover 100 as on a contract by the company. On appeal from this judgment it was held that the defendant company could (tf) Harris v. NicUerson (1873) L. K. 8 () [1893] 1 Q. B. 256 ; and (with Q. B. 286, Finch, S. C. 10. omissions) Finch, S. C. 25. (>) Spencer v. Harding (1870) L. R. 5 (it) The facts were not disputed. See C. P. 561. the report in the Court below, [1892] 2 (s) Sitaram Mar war I v. Thompsim Q. B. 484. 1905) 32 Gal. 884. 48 THK INDIAN CONTRACT ACT. S. 8. not be heard to say the offer was not meant seriously ; that the terms, though rather vague, were capable of a certain meaning, and at least included the event, which had happened, of the plaintiff taking influenza while still using the remedy ; and that, if the offer was unguarded and improvident, that was the defendants' own folly and no answer to the plaintiff's claim. There was an offer to any one who performed the condition (namely, of using the smoke ball as directed) on the faith of the advertisement ; and by such performance it became a contract, not absolute, but subject to the further independent condition of the user contracting influenza or the like while using the remedy, and perhaps during some reasonable time after- wards. (As to conditional or, as the Act calls them, contingent contracts in general, see Chap. III., below, ss. 31 sqq.) As to the objection that to complete the plaintiff's acceptance of the cffer there must either be com- munication to the defendant or some act of a public nature, Bowen, L.J., said (x) : " One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. . . . But there is this clear gloss to be made upon that doctrine, that, as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose that there can be no doubt that where a person, in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance ; and if the person making the offer expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification." It was said without hesitation, several years earlier, by a very learned American writer, that " in a unilateral contract " i.e., where a performance is given for a promise " an acceptance in terms may be, and commonly is, dispensed with " (y). Earlier still the question had been judicially thrown out: " If a man writes, 'Send me such and such goods, and I will pay for them,' is not the sending of the goods, without more, an acceptance of the offer ? " (z). Perhaps ic would now be a safe and more elegant way of stating the law to say that a proposal is in every case accepted by (x) [1893] 1 Q. B. at p. 269. (-) Cresswell, J , in liar ivy v. Johnston (y) Langdell, Summary of the Law of (1848) 6 C. B. 295, 304, 77 R. R. 328, 332. Contracts, s. 12 ; cp. Harriman on Con- The suggestion appears to have escaped tract, 48, 2nd ed. the notice of text-writers for many years. ACTING ON OFFER. 49 performance of its conditions (or perhaps, more accurately, by compliance S. 8. with its terms) ; that communication by the acceptor to the proposer or his authorised agent is necessary when the terms consist of or include a counter-promise (for there is no promise at all without communication)^) ; but that when only acts are required the communication of their perform- ance may or may not be added as a term of the offer at the will of the proposer, which may be either express or inferred from the nature and circumstances of the proposal. From this point of view, the present section of the Act would be logically prior to s. 7. The second branch of the section as to " acceptance of any considera- tion," jBtc., is rather obscure. It is hard to say with any certainty to what particular class or classes of transactions it relates ; nor has anything occurred, so far as is known, to throw light upon it in the generation which has elapsed since the Act was passed. The words seem more appro- priate to gifts or transfers of property than to contracts. It is generally sound principle, no doubt, that what is offered on conditions must be taken as it is offered. The use of the word " reciprocal " is curious, for it seems to exclude the most obvious class of cases, as where goods are sent on approval, and the receiver keeps them with the intention of buying them. Here the seller need not and commonly does not offer any promise, and there is therefore no question of a reciprocal promise as defined in the Act (s. 2 (f )). No doubt the acceptance of an offered consideration, as such amounts to giving the promise (whether reciprocal or not) for which it was offered, or else raises an equivalent obligation. But a thing which is offered in one right and for one purpose may be taken under a different claim of right and with a different intent ; and in that case (which is exceptional but of some importance) the legal result will not be a contract between the parties, whatever else it is capable of being, unless indeed the party receiving the thing so conducts himself as to lead the pro- poser reasonably to conclude that there is an acceptance according to the offer ; and then the proposer can hold him liable on the universal principle that a man's reasonably apparent intent is taken in law to be his real intent. We cannot suppose that the present section is intended to preclude all inquiries of this kind by making every receipt in fact of a thing offered by way of consideration a conclusive acceptance of the proposal. (a) Even the English doctrine (unknown maker of the deed is bound, not because a in India) that a covenant by deed is promise not communicated can of itself binding without communication to the be binding, but because he has solemnly covenantee is no real exception. The acknowledged himself to be bound. i.e. 4 50 THE INDIAN CONTRACT ACT. S. 9. 9. In so far as the proposal or acceptance of any promise Promises, express made in words, the promise is said to be and implied. express. In so far as such proposal or accept- ance is made otherwise than in words, the promise is said to be implied. Express and tacit promises. This section assumes rather than lays down that which we have already found it needful to mention in the course of the commentary, namely, that both proposals and acceptances may take place without express words. An implied promise, in the sense of the Act, is a real promise, though not conveyed in words. It must be distinguished from the promises frequently said in English books to be implied by law, which were fictions required by the old system of pleading to bring cases of "relations resembling those created by contract " (ss. 68 72, below) within the recognised forms of action, and sometimes to give the plaintiff the choice of a better form of action. Thus, if the plaintiff desired to sue for a liquidated sum in the general form of assumpsit instead of in the less convenient form of debt, the law conclusively " implied " a promise to pay the debt, though there might not have been any promise in fact. The actual promise " made otherwise than in words " is a matter of fact which in common law practice would be established by the verdict of a jury ; whereas in the case of the fictitious promise a jury might have to find the facts on which the law proceeded, but would not have been allowed to find that there was no real promise. A tacit promise may be implied from a continuing course of conduct as well as from particular acts. Thus an agreement between partners to vary the terms of the partnership contract may " either be expressed or be implied from a uniform bourse of dealing " (s. 252, p. 638, below, which reproduces well-settled English law). Where parties have acted on the terms of an informal document which has passed between them, but has . never been executed as a written agreement or expressly assented to by both, it is a question of fact whether their conduct establishes an implied agreement to be bound by those terms (b). The language of the section appears to assume that the terms of a contract may be (as undoubtedly they may, by familiar law and practice) partly express and partly implied. A term which, in the opinion of the Court, results from the true construction of the language used by the parties may be said to be implicit in that language, but in the sense of the present section it is not implied ; for it is contained in the words of the (b~) Brogden v. Metropolitan Hallway also be regarded as a case of acceptance Co. (1877) 2 App. Ca. 666. This might by acting on the terms of a proposal. EXPRESS AND TACIT PROMISES. 51 agreement (V), though not apparent on the face of them. But there is Ss. 9, 10. a class of cases, of considerable importance t in England, where the parties are presumed to have contracted with tacit reference to some usage well known in the district or in the trade, and whatever is prescribed by that usage becomes an additional term of the contract, if not contrary to the general law or excluded by express agreement. Such terms are certainly implied, as resulting not from the words used, but from a general interpre- tation of the transaction with reference to the usual understanding of persons entering on like transactions in like circumstances. In India the only cases of this kind which have been reported in the High Courts appear to be on implied contracts to pay interest. Such a contract may exist by reason of mercantile usage (d~). The ground on which usages of this kind are enforced is not that they have any intrinsic authority, but that the parties are deemed to have contracted with reference to them. They need not, accordingly, be ancient or universal. It is enough that they are in fact generally observed by persons in the circumstances and condition of the parties. CHAPTER II. OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS. 10. All agreements are contracts if they are made by What agreements the ^ ree consent of parties competent to con- tract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in British India, and not hereby expressly- repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. The first paragraph of this section is developed and applied by the more specific provisions of several following sections, which will be considered as they occur. (c) We say agreement, not necessarily evidence of mercantile usage had not contract. It often depends on the true been sufficiently considered. On the new construction of an agreement whether it trial the evidence was found insufficient, is a contract or not. and on a fresh appeal the Judicial Com- (d) In Jugtjomoliun, G/tose v. Maniclt- mittee refused to disturb the judgment : rliund (1859) 7 M. I. A. 263, a new trial Jvggomohun Glwse v. Kalsreechund (1862) was ordered on the ground that the D M. I. A. 260. 42 52 THE INDIAN CONTRACT ACT. S. 10. As to contracts required to be in writing. See s. 25, sub-ss. 1 and 3, and s. 28, Exception :>.. See also Indian Companies Act VI of 1882, s. 11 as to memorandum of association, s. 39 as to articles of association, and s. 67 as to contracts by companies. In this connection may also be noted the provisions of the Transfer of Property Act which require a writing in the case of a sale (s. 54), of a mortgage (s. 59), lease (s. 107), and gift (s. 123), and the provisions of the Indian Trusts Act which require a trust to be created in writing (s. 5) ; but these are not cases of contract in the proper sense of the word. Acknowledgments to save the law of limitation are required to be in writing by s. 19 of the Limitation Act XV of 1877. Submissions under the Arbitration Act IX of 1899 are similarly required to be in writing. Oral and documentary evidence. The Act does not deal with the kind of proof generally required to establish the facts constituting a contract. In British India the law on that subject is codified in the Evidence Act, I of 1872. See especially ch. VI. of that Act, ss. 91 sqq., as to the exclusion of oral by documentary evidence. Variance between print and writing. Print and other mechanical equivalents of handwriting are generally in the same position with regard to rules of evidence and construction. But where a contract is partly printed in a common form and partly written, the words added in writing are entitled, as Lord Ellenborough said in a judgment repeatedly approved (e), if there should be any reasonable doubt upon the sense and meaning of the whole, to have a greater effect attributed to them than to the printed words ; inasmuch as the written words are the immediate language and words selected by the parties themselves for the expression of their meaning, and the printed words are a general formula adapted equally to their case and that of all other contracting parties upon similar occasions. But the print is not to be discarded altogether, and the Court should discover the real contract of the parties from the printed as well as from the written words (/). As to the law relating to Registration. S. 17 of the Indian Registra- tion Act III of 1877 specifies documents which require to be registered ; and s. 49 of the same Act provides that no document required by s. 17 to be registered shall affect any immovable property, unless it has been registered in accordance with the provisions of that Act. (e) Robertson v. French (1803) 4 East, Co. (1889) 22 Q. B. Div. 499, 501. 130, 7 R. R. 538, 540, approved in H. L., (/) Paul Seier v. CJiotalal Jarerdas Gli/nn v. Margetson [1893] A. C. 351, (1906) 30 Bom. 1. 357; in C. A.. Standard Munne Insurance CAPACITY TO CONTRACT. 53 11. Every person is competent to contract who is of the S. 11. who are com- a g e f majority according to the law to which petentto contract. he ig gub j ectj an( j W h is of sound mind, and is not disqualified from contracting by any law to which he is subject. This section deals wifch personal capacity in three distinct branches : (a) disqualification by infancy ; (b) disqualification by insanity ; (c) other special disqualifications by personal law. Infancy. As to infancy, the terms of the Act (g], as compared with the common law, were long a source of grave difficulty. By the common law an infant's contract is generally not void but voidable at his option ; if it appears to the Court to be for his benefit, it may be binding, and especially if the contract is for necessaries. There was formerly, however, a current opinion, countenanced by the lax forms in which some of the decisions were expressed, that infants' agreements were of three kinds : namely, that some were wholly void as being obviously not for the infant's benefit, some valid as being obviously for his benefit, and all others voidable. This opinion is now quite exploded (//-), but it was to be found in text-books at the time when the Indian Contract Act was framed. Still there was never any authority for saying that infants were absolutely incompetent to contract. The literal construction of the present section leads to the conclusion that being of the age of majority according to one's personal law is a necessary element of contractual capacity. Such capacity is not indeed expressly denied to persons who are not of full age, but a reader not acquainted with the rules of English law would naturally suppose that it was excluded by all but necessary implication. Since the Act, as a whole, purports to consolidate the English law of contracts, with only such alteration as local circumstances require, and there is no trace in the report prefixed to the original draft, or any other relative document, of any intention to make a jiew^ rule as to the contracts of minors, it is not surprising that the Indian High Courts endeavoured to avoid a construc- tion involving so wide a departure from the law to which they had been, accustomed ; but the Judicial Committee has now declared that the literal construction is correct, and has suggested that it was intended to give effect to the rule of Hindu law on the subject (i). (;/) They are almost identical with those (/<) Anson, Law of Contract, 10th ed. of the original draft. There is nothing to 121. show that the Commissioners were aware (/) Mohorl Bibee v. Dltvrmodas Ghose of any difficulty. Quccre whether they (1903) 30 Cal. 539, L. R. 30 Ind. Ap. 114. intended to alter the law. THE INDIAN CONTRACT ACT. S. 11. We may mention that in England the powers of infants to contract and to ratify their contracts have been much restrained by the Infants' Relief Act of 1874, a statute of good intentions and imperfect workmanship ; and the Sale of Goods Act, 1893, s. 2, has declared the liability of infants to pay a reasonable price (&) for necessaries sold and delivered to them, and has defined necessaries according to the latest and best judicial authorities. These enactments, of course, have no authority in India, and can be referred to only for the purpose of illustrating the common law rules. The result of the statutes is to bring the English law much nearer to the Anglo-Indian, for most practical purposes, than it might seem at first sight. We proceed to the details of the Anglo-Indian law. Age of majority. This is now regulated by the Indian Majority Act IX of 1875. S. 3 of the Act declares that every person domiciled in British India shall be deemed to have attained his majority when he shall have completed his age of eighteen years, and not before. In the case, however, of a minor of whose person or property or both a guardian has been appointed by a Court, or of whose property the superintendence is assumed by a Court of Wards, before the minor has attained the age of eighteen years, the Act provides that the age of majority shall be deemed to have been attained on the minor completing his age of twenty-one years. S. 2 of the Act declares that nothing in the Act contained shall affect the capacity of any person to act in matters of marriage, dower, divorce, and adoption. " Law to which he is subject." The age of majority as well as the disqualification from contracting is to be determined by the law to which the contracting party is subject. This provision is applied according to the principle of English law, namely, that the question of the capacity of a person to enter into a contract is decided by the law of his domicil, and not the law governing the substance of the contract. Thus in Kashiba v. Shripat (?) a Hindu widow above the age of sixteen and under the age of 5 eighteen years, whose husband had his domicil in British India, executed a bond in Kolhapur (outside British India), where she was then residing. As the widow had not changed her domicil after her husband's death, her domicil was the same as that of her husband at his death, namely, British India. The question arose whether her liability on the bond was to be governed by the law of Kolhapur (lex loci coniractus}, or by the law of British India (law of her domicil). According to the law obtaining in Kolhapur, which is Hindu law unaffected by the Contract Act, she would (J(~) Tt need not be the price contracted for. We shall recur to the significance of this point. (0 (1894) lit Bom. 6!)7. See also Jtn/t ilk tin nil unil KmiKinn Banli, Ltd. v. Jfoir (1885) 7 All. 41)0. INFANCY. 55 have been liable on the bond, as the age of majority according to that law S. 11. is sixteen years (in), and the bond was executed by her after she completed her sixteenth year. According to the law in British India, namely, the Contract Act, she was not liable, as the contract was made when she was under the age of eighteen years, and was not ratified by her after she attained her majority. It was held that her capacity to contract was regulated by the Contract Act, being the law of her domicil, and that under the Act she was not liable on the bond. Minor's contract. If the first branch of the rule laid down in the section be converted into a negative proposition, it reads thus : No person is competent to contract who is not of the age of majority according to the law to which he is subject ; in other words, a minor is not competent to con- tract. This proposition is capable of two constructions : either that a minor is absolutely incompetent to contract, in which case his agreement is void, or that he is incompetent to contract only in the sense that he is not liable on the contract though the other party is, in which case there is a voidable contract. If the agreement is void, the minor can neither sue nor be sued upon it, and the contract is not capable of ratification ; if it is voidable, he can sue upon it, though he cannot be sued by the other party, and the contract can be ratified by the minor on his attaining majority. The former current of Indian decisions was that, as under the English law, a minor's contract is only voidable at his option (w). But in 1903 the point came before the Judicial Committee (0), on the question whether s. 64 of the Act, which deals with the rescission of voidable contracts and the duty of the party rescinding to restore any benefit received, applies to the contracts of infants. Admitting the general current of decision in India to have been in favour of holding such contracts only voidable, their Lordships considered themselves free to act on their own view ; and having regard to the terms of ss. 2 and 10, as well as of the present section, they held that " the Act makes it essential that all contracting parties should be competent to contract," and especially provides that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Act. It was accordingly held in that case that a O) See Mayne's Hindu Law, s. 210, case) ; Sadashiv v. Trinibalt (1898) 23 (Jth ed. (1900). Bom. 146, the former decisions followed (w) Saslii Bhman v. Jadu Nath (1885) with some hesitation. The decision of 11 Cal. 552 ; Hanmant v. Jayarao (1888) the Judicial Committee stated in the text 13 Bom. 50; Mahomed Arif v. Saraxwati makes it useless to give details of these (1891) 18 Cal. 259 ; contra, perNorris, J., judgments. Fat him v. Drlimuth (1893) 20 Cal. 508; () Mohnrl Bllee v. Dlnirmodas Ghosc., and see Ka*li>l>) That section provides that on with Mohorl Sibee v. Dhurmodas Ghote, adjudging the cancellation of an instru- note (?) above ; Indar Singh v. Narindur ment the Court may require the party to Singh (1904) Punj. Rec. no. 33. whom such relief is granted to make any (/) Meghan Dube v. Pran Singh (1908) compensation to the other which justice 30 All. 63. may require. () Indrau Ramaswami v. Anthappa (?) Dattaram v. Vlnayak (1903) 28 Chettiar (1906) 16 Mad. L. J. 422. Bom. 181 ; Kamta Prasad v. Sheo Gopal (f) Kundan Sibi v. Sree Narayan Lai (1904) 26 All. 342, a case on all fours (1906) 11 C. W. N. 135. AGREEMENTS WITH MINORS. 57 Infants' Relief Act, 1874, he is liable." The only difference between this S. 11. and the Madras case, so far as the note sued upon goes, is that in the latter case there was a promissory note passed during minority, and the note was renewed by the defendant on attaining majority, while in the Calcutta case there was no bond passed during minority, but the bond was executed for the first time after attaining majority. This circumstance, however, cannot make any difference in principle, nor is there anything in the judgment in the Calcutta case to show that the decision proceeded upon any such difference. The ground of the decision was that there was a neiv consideration for the promise on which the defendant was sued. We fail to see how either the forbearance to sue or the advance for necessaries could be regarded as a new consideration, and we are of opinion that the decree so far as it awarded to the plaintiff the price of the goods sold was erroneous in law. In England it is not clear that money advanced to a minor for the purchase of necessaries and actually expended thereon may not be recovered as having been itself a necessary. The decision of the Judicial Committee has been followed by the High Courts of Bombay (tt) and Allahabad (x). Necessaries. S. 68 provides for liability in respect of necessaries supplied to a person incapable of entering into a contract. A minor is a person incapable of contracting within the meaning of that section (y), and, therefore, the provisions of that section apply to his case. It will be observed that the minor's property is liable for necessaries, and no personal liability is incurred by him, as it may be under English law. S. 70 cannot be read so as to create any personal liability in such a case. Under English law the liability is not on the express promise, if any there be ; the obliga- tion is quasi ex contracfu to pay a reasonable price for necessary goods supplied : Sale of Goods Act, 1893, s. 2. It would probably be held that this only declares the common law (2), and, therefore, that the rule is the same as to necessaries other than goods. Necessaries must be things which the minor actually needs ; therefore it is not enough that they be of a kind which a person of his condition may reasonably want for ordinary use ; they will not be necessary if he is already sufficiently supplied with things of that kind, and it is immaterial whether the other party knows this or (u) Dattaram v. Vitiayak (1903) 28 contract. Bom. 181. (y) Watkins v. Dhunnoo Baboo (1881) (x) Kamta Prasad v. Sheo Gopul Lai 7 Cal. 140, 143 ; Mohori It'ibee v. Dhur- (1904) 26 All. 342. Held in both cases modas Ghose, note(t), p. 53, above, that the provisions of ss. 64, 65, below, (r) See A .?/< v. Inman [1908] 2K. B. 1, are not applicable to a minor's agreement, C. A., especially the judgment of Fletcher as there has never been even a voidable Moulton, L.J. 58 THE INDIAN CONTRACT ACT. S. 11. not (a). It may be presumed that Anglo-Indian Courts would follow the English decisions on this point, which does not appear to be precisely covered by the language of s. 68. Objects of mere luxury cannot be necessaries, nor can objects which, though of real use, are excessively costly. The fact that buttons are a normal part of many usual kinds of clothing, for example, will not make pearl or diamond buttons necessaries (b). Specific Performance. A minor's agreement being now decided to be void, it is clear that there is no agreement to be specifically enforced ; and it is unnecessary to refer to former decisions and distinctions, following English authorities which were applicable only on the view now overruled by the Judicial Committee. But though an agreement entered into by a minor himself cannot be specifically enforced, it has been held by a Full Bench of the Calcutta High Court that, if a contract is validly entered into on behalf of a minor by his guardian, and there is mutuality in the contract, it may be specifically enforced (/). And as no contract that is not for the benefit of a minor can be said to have been validly entered into on his behalf, it follows that the courts will not enforce specific performance of contracts that are not for the benefit of the minor (d). "A court will never enforce specific performance against a minor when such enforcement is to his detriment " (e). Thus where the certificated guardian of a minor obtained the sanction of the District Judge for the sale of the minor's property to A. B. at Rs. 725, and subsequently, on receiving an offer for Rs. 825 from C. D., she obtained the sanction of the Court for the sale to C. D. at Rs. 825, and sold the property to him, it was held, in a suit by A. B. against the guardian for specific performance, that the contract with A. B. was manifestly to the detriment of the minor and could not be specifically enforced (/). Fraudulent representation. It is well established in English law that an infant cannot be made liable for what was in truth a breach of contract by framing the action ex Micto. " You cannot convert a contract into (a) Johnstone v. Marks (1887) 19 (c) Mir Sarwarjan v. Fakharuddin Q. B. D. 509. Previous decisions were (1906) 31 Cal. 163. conflicting, but the point may now be (d) Etwarta v. Cliandra Nath (1906) taken as settled. Cp. the Sale of Goods 10 C. W. N. 763; Jaimetji v. Kaxhi until Act, 1893, s. 2. (1901) 26 Bom. 326, 337 ; Khairunncxsa (t>) The classical English authority is Sibiv. Luke A'ath (1899) 27 Cal. 276. llyder v. WombwcU (1868) L. R. 4 Ex. (e) Chhitar Mai v. Jag an Nath Prasad 32. The minuteness of the English cases (1907) 29 All. 213. on this point seems due, as matter of fact, (/) Ibid. See also Waghela, Rajsanjl to the general bias of juries in favour of v. Shekh Maxludin (1887) 11 Bom. 551, tradesmen, and their opinion that it is L. R. 14 Ind. Ap. 89. shabby to plead infancy. SPECIAL DISQUALIFICATIONS. 59 a tort to enable you to sue an infant "(#). Following this principle, it has been S. 11. held in India that a personal decree cannot be passed against a minor for money received by him from the lender on a fraudulent representation that he is of full age (K). But where the repayment of the loan so obtained is secured by a mortgage of the minor's property, the Court has the power to pass a mortgage decree, though it may in particular cases decline to allow interest and costs to be added to the mortgage debt (). " Of sound mind.'' See s. 12 for the definition of soundness of mind. By English law a lunatic's contract is not void, but voidable at his option, and this only if the other party had notice of his insanity at the time of making the contract (Jc). But, after the decision that this section makes a minor's agreement wholly void, it is clear that a person of unsound mind must in British India be held absolutely incompetent to contract. And it has in fact been held to be so in a recent Madras case (/). The supply of necessaries to lunatics, among other persons " incapable of entering into a contract," is dealt with by s. 68 of the Act ; see the illustrations. Persons otherwise " disqualified from contracting." The capacity of a woman to contract is not affected by her marriage either under the Hindu or Mahomedan law. A Hindu female is not, on account of her sex, absolutely disqualified from entering into a contract ; and marriage, what- ever other effect it may have, does not take away or destroy any capacity possessed by her in that respect. It is not necessary to the validity of the contract that her husband should have consented to it. When she enters into a contract with the consent or authority of her husband, she acts as his agent, and binds him by her act ; and she may bind him by her contract, in certain circumstances (in), even without his authority, the law empowering her on the ground of necessity to pledge her husband's credit. Otherwise a married woman cannot bind her husband without his authority, but she is then liable on the contract to the extent of her slridhanam (separate property) (n). Similarly, a married Hindu woman may contract jointly with her husband, but then she is liable to the extent of her siridhanam only (0). In the same way a married Mahomedan woman (//) Jennings v. Rundall (179!)) 8 T. R. (7) Macliaima v. Usman Bean (1907) 335, 4 R. R. 680. 17 Mad. 78. (/(.) Dhan Mull v. Ram Chunder (1 897) (/.) E.g., pressing necessity: Pusi v. 24 Cal, 2fi5. Mafiadeo Prasad (1880) 3 All. 122, at p. 1 24. (/') Saral Chand Slitter v. Sreemutty (n) Per Cur. in Nathubhai v. Jarher Molmn JliU (1898) 2 C. W. N. 18, (1876) 1 Bom. 121. .affirmed on appeal, if>., p. 201. (<>) Govindji, v. Lakmida*(1873) 4 Bom. (/O Imperial Loan Co. v. Stone. [1892] 318; Narotam v. NanJta, (1882) (i Bom. 1 Q. E. 599, C. A., confirming previous 473. authorities. GO THE INDIAN CONTRACT ACT. S. 11. is not by reason of her marriage disqualified from entering into a contract. Turning next to persons of other denominations, there are two Indian enactments that create the separate property of married women, and impliedly confer upon them, as an incident of such property, the capacity to contract in respect thereof. The one is the Indian Succession Act X of 1865, s. 4, and the other the Married Women's Property Act III of 1874. Both these enactments apply to the whole of British India, but neither of them applies to any marriage one or both of the parties to which professed, at the time of the marriage, the Hindu, Mahomedan, Buddhist, Sikh, or Jaina religion (p). S. 4 of the Succession Act provides that no person shall by marriage acquire any interest in the property of the person whom he or she marries, nor become incapable of doing any act in respect of his or her own property which he or she could have done if unmarried. The effect of this was that on or after January 1st, 1866 (q), all women married to whose marriages the Act applied became absolute owners of all property vested in, or acquired by, them, and their husbands did not by their marriage acquire any interest in such property (r). It was subsequently considered expedient to make due provision for the enjoyment of wages and earnings by women married before 1866 (r), and the Married Women's Property Act enacted that the wages and earnings of any married woman acquired or gained by her after the passing of that Act in any employment, occupation, or trade carried on by her, and all money or other property acquired by her through the exercise of any literary, artistic, or scientific skill, should be deemed to be her separate property (s. 4). The Act also provides that a married woman may sue and may be sued in her own name in respect of her separate property (s. 7), and that a person entering into a contract with her with reference to such property may sue her, and to the extent of her separate property recover against her, as if she were unmarried (s. 8). Certain classes of persons may be disqualified under certain enactments from entering into contracts in respect of matters specified in those enactments. Thus where a person in Oudh is declared a "disqualified proprietor" under the provisions of the Oudh Land Revenue Act, 1876, he is not competent to alienate his property, and the same incapacity extends to contracts entered into by him, though they relate to property situate outside the province of Oudh (/). (p) See Act III of 1874, s. 2, and Act X (r) See the preamble to Act III of 1874. of 1865, s. 331. (t) Laclinie Narain v. Fateh Bahadur (y) Act X of 1865, s. 331. Sinffh (1902) 25 All. 195, 202. WHAT IS SOUND MIND. 61 12. A person is said to be of sound mind for the purpose S. 12. of making a contract if, at the time when he What is a sound . mind for the pur- makes it, he is capable of understanding it and poses of contracting. . j- i .j -i. ff j. or forming a rational judgment as to its enect upon his interests. A person who is usually of unsound mind, but occasion- ally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. Illustrations. (a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals. (b) A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. Doubtful effect of the section. The difficulty of understanding what is really the effect of this section, in conjunction with s. 11, has already been pointed out. The presence or absence of the capacity mentioned in this section at the time of making the contract is in all cases a question of fact. Where a person is usually of unsound mind, the burden of proving that at the time of the contract he was of sound mind lies on the person who affirms it. In cases, however, of drunkenness or delirium from fever or other causes, the onus lies on the party who sets up that disability to prove that it existed at the time of the contract. Questions of undue influence and of incapacity by reason of unsoundness of mind must not be mixed up, involving as they do totally different issues (M). The second paragraph of the section provides that a person who is usually of unsound mind, but occasionally of sound miud, may make a con- tract when he is of sound mind. Thus even a patient in a lunatic asylum may contract during lucid intervals (see illustration (a) ). The question may arise whether a lunatic adjudged to be so under Act XXXIV of 1858 or Act XXXV of 1858 (#), and of whose property a committee or manager (u) Sayad Muhammad v. Fatteh founded, to some extent, on 16 & 17 Viet. Muhammad (1894) L. E. 22 Ind. Ap.. c. 70 (the Lunacy Regulation Act, 1853, pp. 4, 10, 22 Cal. 324 ; Durga Salthsh no longer in force in England), and Singh v. Mirza MuJtammad Ali Beg applies to proceedings in lunacy in (1904) L. R. 31 Ind. Ap. 235. chartered High Courts, and the second to (*) The first of these two Acts is proceedings in Mufassal Courts. 62 THE INDIAN CONTRACT ACT. Ss. 12, 13. is appointed, can contract during intervals of sound mind. In England, a lunatic not so found, or before he is so found, by inquisition is not by reason of that fact absolutely incapable of contracting, though the burden of proof in such a case is on the party maintaining that he is not insane, or that the contract was made during a lucid interval (y) ; and the same would appear to be the law in India. Where, however, a committee or a manager of the estate of a lunatic adjudged to be so is appointed under either of the Indian Acts, no contract can be entered into by a lunatic in respect of his estate even though at the time of the contract he may be in a lucid interval. Similarly it is now settled in England that a person found lunatic by inquisition is incapable of dealing with his property inter vivos while the inquisition is in force (z). 13.- " Consent " defined. -Two or more persons are said to consent when they agree upon the same thing in the same sense. Apparent and real consent. The language of this section is, on the face of it, more of a judicial or expository than of a legislative kind. As an authoritative definition it does not seem to define very much. It would need some courage to maintain that persons can be said to consent when they do not agree upon the same thing, or that if they do not agree in the same sense they can be said to agree in any sense at all. If the section is to cover all kinds of contracts, as presumably it does, the word " thing " must obviously be taken as widely as possible, though it seems most appropriate where the contract has to do with corporeal property. We must understand by " the same thing " the whole content of the agreement, whether it consists, wholly or in part, of delivery of material objects, or payment, or other executed acts, or promises. The phrase comes originally from the New York Civil Code, but it has, at all events, high judicial sanction, and the passage in which it was used by the late Lord Hannen, in the year before this Act was passed, is perhaps the best commentary on the general significance of the present section : " It is essential to the creation of a contract that both parties should agree to the same thing in the same sense. Thus if two persons enter into an apparent contract concerning a particular person or ship, and it turns out that each of them, misled by a similarity of name, had a different (>j) Ilall v. Warren (1805) 9 Ves. 605, 7 R. R. 306, to which Siwolt v. Watts, (1818) 11 Beav. 105, adds nothing material. 00 Re. Walker [1905] 1 Ch. 160, C. A. Of a will it is otherwise for the reason explained ib, at p. 172. CONSENT. 63 person or ship in his mind, no contract would exist between them : Raffles S. 13. v. Wuh&lhaus (a). " But one of the parties to an apparent contract may, by his own fault, be precluded from setting up that he had entered into it in a different sense to that in which it was understood by the other party. Thus in the case of a sale by sample where the vendor, by mistake, exhibited a wrong sample, it was held that the contract was not voided by this error of the vendor : Scott v. Littledale (I). "But if in the last-mentioned case the purchaser, in the course of the negotiations preliminary to the contract, has discovered that the vendor was under a misapprehension as to the sample he was offering, the vendor would have been entitled to show that he had not intended to enter into the contract by Avhich the purchaser sought to bind him. The rule of law applicable to such a case is a corollary from the rule of morality which Mr. Pollock (c) cited from Paley (d), that a promise is to be performed ' in that sense in which the promisor apprehended at the time the promisee received it,' and may be thus expressed : ' The promisor is not bound to fulfil a promise in a sense in which the promisee knew at the time the promisor did not intend it.' And in considering the question in what sense a promisee is entitled to enforce a promise it matters not in what way the knowledge of the meaning in which the promisor made it is brought to the mind of the promisee, whether by express words, or by conduct, or previous dealings, or other circumstances. If by any means he knows that there was no real agreement between him and the promisor, he is not entitled to insist that the promise shall be fulfilled in a sense to which the mind of the promisor did not assent " (e). 0) 2 H. & C. 906 ; Finch, S. C. 459. Queen's Bench Divisions of the High This is a very peculiar case of an equivocal Court of Justice (died 1897). term understood in different senses by the (d) Moral and Political Philosophy, parties. There were two ships of the Book III. Chap. V. Paley's rule, however, same name sailing at different times. The is not quite correct. The true test is not decision was on the pleadings, so that the what either promisor or promisee actually questions of fact which might arise in the thought, but the sense in which the proof of such a defence were not and promise would reasonably be understood could not be considered. by the promisee : Whately's note to (V) 8 E. & B. 815 ; Finch, S. C. 460. Paley, I.e., and per Blackburn, J., in (Note that the sale was of a specific cargo, Foiokes v. Manchester and, London Assur- ed the seller misled the buyer, though ance Association (1863) 3 B. & S. 917,929. innocently. If any one was entitled to See an ingenious paper on this note by set aside the contract, it was the buyer.) Priya Nath Sen in Calc. Law Journ., March, (c) Charles Pollock, then Q.C., after- 1905, and note thereon in L.Q.R. xxi. 219. wunls a Baron of the Court of Exchequer () Per Hannen, J., Smith v. and a member of the Exchequer and (1871) L. 11. 6 Q. B. p. 609. 64 THE INDIAN CONTRACT ACT. S. 13. Students and young practitioners must be warned not to exaggerate the working importance of cases which are quoted and discussed for the very reason that they are exceptional. Generally parties who have concurred in purporting to express a common intention by certain words cannot be heard to deny that what they did intend was the reasonable effect of those words ; and that effect must be determined, if necessary, by the Court, according to the settled rules of interpretation. Whoever becomes a party to a written contract " agrees to be bound, in case of dispute, by the interpretation which a Court of law may put upon the language of the instrument," whatever meaning he may attach to it in his own mind (/). Exceptions to this rule exist, but they are admitted only for special and carefully limited reasons. Warning is also still needed, having regard to the language current in all but the most modern text-books, against the habit of using the word " mistake " as if it denoted any general legal principle, or was capable, taken alone, of explaining any departure from the normal grounds of decision (g). Ambiguity. Sometimes an apparent agreement can be avoided by showing that some term (such as a name applying equally to two different ships) is ambiguous, and there has been a misunderstanding without fault on either side. Such cases, however, are in fact extremely rare. It usually turns out either that the terms have an ascertained sense by which both parties are bound, and there is a contract which neither can dispute, what- ever either of them may profess to have thought, or that, when the facts are established, there was really never a proposal accepted according to its terms, and therefore the conditions of a binding contract were not satisfied. Many of the cases cited in the books under the head of mistake belong to the latter class, as where a broker employed to sell goods delivered to the intending vendor and the intending purchaser two sale-notes describ- ing goods of different qualities (h). " The contract," said the Court, " must be on the one side to sell, and on the other side to accept, one and the same thing." No such contract being shown on the face of the transaction, there was no need to say, and the Court did not say, anything about mistake. In a later case the defendant wanted to order three rifles by telegraph, and a blunder in transmitting the message turned three into the, which the plaintiff naturally took as referring to the number of fifty men- tioned in a previous letter. Here it was held that the telegraph clerk had (/) Per Lord Watson, Stewart v. Kennedy (1890) 15 App. Ca. 108, 123. (g) Sir W. Anson's pages on this subject (Law of Contract, Chap. IV. s. 1) should be carefully read by all students. They are the most concise exposition to be found in English books of repute, and one of the most accurate. (/*) Thornton v. Kempder (1814) 5 Taunt. 786, 15 K. E. 658. FUNDAMENTAL ERROR. 65 no authority to send the message except as it was delivered to him, so that the message as communicated to the plaintiff was not the defendant's offer at all (i). This, again, has really nothing to do with mistake in point of law. It was immaterial whether the wrong message was sent by the clerk's mistake, or by fraudulent alteration, or through some external accident, such as a thunderstorm, affecting the instruments. Similarly if the addressee of a cipher or code message conveying a proposal misreads the proposal not unreasonably, and accepts it according to his own under- standing, he cannot be held bound to the contract which the proposer intended. If the terms are really ambiguous there is nothing, in such a case, which either party can enforce (7c). Fundamental Error. In certain classes of cases there may be all the usual external evidence of consent, but the apparent consent may have been given under a mistake, which the party is not precluded from showing, and which is so complete as to prevent the formation of any real agree- ment " upon the same thing." Such fundamental error may relate to the nature of the transaction, to the person dealt with, or to the subject-matter of the agreement. As to the nature of the transaction. A rftan who has put his name to an instrument of one kind understanding it to be an instrument of a wholly different kind may be entitled, not only to set it aside against the other party on the ground of any fraud or misrepresentation which caused his error, but to treat it as an absolute nullity, under which no right can be acquired against him by any one. In a modern case the defendant had purported to endorse a bill of exchange which he was told was a guaranty. The plaintiff was a subsequent holder for value, and therefore the fact that the defendant's signature was obtained by fraud would not have protected him in this action. But the Court held that his signature, not being intended as an endorsement of a bill of exchange, or as a signature to any negotiable instrument at all, was wholly inoperative, as much so as if the signature had been written on a blank piece of paper first, and a bill or note written on the other side afterwards (/). There are much older authorities showing that if a deed is falsely read over to an illiterate man, and he executes the deed relying on the false reading as being the true substance of the transaction, his act is wholly void (m). S. 13. (*) Uenkel v. Pape (1870) L. R. 6 Ex.7. (k) Falckv. Williams [1900] A. C. 176, a decision of the Judicial Committee on very peculiar facts. (I) Foster v. MacTilnnon (18G9) L. R. 4 C. P. 704, Finch, S. C. 434. " I.C. (m) Thorougkgood's Case, 2 Co. Rep. 9 b, and other books cited in Foster v. Mackinnon. There are modern cases in equity illustrating the same principle, but they are not so decisive, and can hardly be understood without knowledge of English equity practice. It is sufficient 66 THE INDIAN CONTRACT ACT. S. 13. We may expect to find fraud as an element in cases of this class. But it is not the decisive element. A signature attached to a document supposed to be of a wholly different kind, or not to contain a clause so important as substantially to alter its character, is invalid unless the signer is estopped by negligence from denying that he understood what he was signing, and this " not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature ; in other words, that he never intended to sign, and there- fore in contemplation of law never did sign, the contract to which his name is appended" (ri). Neither is fraud a necessary element. The principle was applied by the High Court of Bombay, while this Act was still recent, to a case (0) where, in very peculiar circumstances, there was a misrepresentation by inadvertence, but no question of fraud. There the plaintiffs, who were creditors of the defendants, sued to have the signature of their agent to a composition deed cancelled, 'and to have it declared that the deed was not binding on the plaintiffs. The deed was signed under these circumstances : the defendants' firm had suspended payment, and at a creditors' meeting ib was resolved that the business of the defendants' firm should be wound up by voluntary liquidation under the supervision of a committee. This resolution was confirmed at a subsequent meeting, and it was further resolved that a composition deed should be prepared in pursuance of the above resolutions. No mention was made at either of the meetings of any release of the claims of the creditors. After a few days a deed was tendered by one of the defendants' firm to the plaintiffs' agent for execution. He was then engaged with urgent English mail business, and he declined to sign it without being able to read it. The debtor then earnestly pressed him to execute the document at once, stating that it was of the utmost importance that no time should be lost, and adding that the deed was nothing more than an assignment to trustees for the benefit of creditors as agreed to at the creditors' meeting. Upon the faith of that assurance the plaintiffs' agent executed the deed. As a matter of fact the deed contained a release by the creditors to the debtors. As soon as the plaintiffs' agent came to know of this he repudiated his signature and refused to be bound by the deed. On behalf of the plaintiffs it was contended that the deed, so far as it operated as a release, was a different deed from that which the plaintiffs' agent intended to execute, or thought to refer to Howatson v. Webb [1908] 1 (n) Foster v. Mackinnon, L. R. 4 C. P. Ch. 1, C. A., which tends to show that at p. 711. some of the earlier authorities must be () Oriental Hank Corporation v. used witli caution. See also Dagdu v. Fleming (1879) 3 Bom. 242. Bhana (1904) 28 Bom. 420. CONSENT AND ESTOPPEL. 67 he was executing, and that his signature could not therefore be held to be S. 13. a consent to its contents. This argument was upheld, and it was declared that the deed was not the deed of the plaintiffs so far as it purported to operate as a release to the debtors. The Court proceeded further to hold that the transaction was brought about by misrepresentation within the meaning of s. 18, cl. 2 (which see below). It is difficult to see why sub-s. 2 was more in point than sub-s. 1 ; but in any case it would seem that, having found that the supposed contract was void because there was no contract at all, the Court had no need to consider whether or not the consent, if any, was free within the meaning of s. 14 (p). In a recent Calcutta case, where a document was signed only on the first page, but was not signed on the other pages, the executant having discovered that it was not in accordance with the terms previously agreed upon, it was held that the document was a nullity (g). Consent and Estoppel. The Indian Courts have followed English authority in holding that, in normal circumstances, a man is not allowed to deny that he consented to that which he has in fact done, or enabled to be done with his apparent authority. Thus when a person entrusts to his own man of business a blank paper duly stamped as a bond and signed and sealed by himself in order that the instrument may be drawn up and money raised upon it for his benefit, if the instrument is afterwards duly drawn up and money obtained upon it from persons who have no reason to doubt the good faith of the transaction, it is presumed that the bond was drawn in accordance with the obligor's wishes and instructions (r). As to inchoate stamped negotiable instruments provision is made by the Negotiable Instruments Act XXVI of 1881, s. 20, which is as follows : " When one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in British India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives primd facie authority to the holder thereof to (p) It will be seen in this case that the eleineut of truth in it is that A., who has mistake as to the nature of the transaction misled B., however innocently, is estopped was caused by the misrepresentation of from disputing the validity of the the other contracting party. Sir W. K. contract as against B., if it turns out to Anson suggests (Principles of the Law of be B.'s interest to affirm it. But still the Contract, p. 147) that in such a case the transaction is void in the sense that even contract is only voidable for misrepre- innocent third persons cannot acquire sentation, and that it is void on the rights under it against B.'s will, ground of mistake only if the mistake is (#) Banltu Behari Shaha v. Krlshto brought about by the act of a third party. Guhindo (1903) 30 Cal. 433. This view is not supported by any English (r) Wahidunnessa v. Surgadass (1879) authority, and is contrary to Oriental 5 Cal. 39. Bank Corporation v. Fleming. The 52 68 THE INDIAN CONTRACT ACT. S. 13. make or complete, as the case may be, upon it a negotiable instrument for any amount specified therein and not exceeding the amount conveyed by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount, provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder." As to the existence or non-existence of apparent authority in particular circumstances very delicate questions may arise under the law and practice of English company business. It would not be useful to pursue these here (s). Parda-nishin cases. It might be possible to refer to this head some of the cases in which the gifts or other acts, practically amounting to acts of bounty, of parda-nishin (/) women have been set aside. But it is certainly not necessary for this purpose to show that the nature of the act was not understood at all. The jurisdiction rests on a presumption of imperfect knowledge of the world and exposure to undue influence, making it the duty of a person taking a beneficial grant or contract from a parda-nishin woman to show that the deed was explained to her and understood by her (u), so that the ordinary burden of proof is reversed. These cases accordingly belong to the head of undue influence. Error as to the person of the other party. There can be no real formation of an agreement by proposal and acceptance unless a proposal is accepted by the person, or one of a class or number of persons, to whom it is made. Similarly the acceptance must be directed to the proposer, or at least the acceptor must have so acted as to entitle the proposer to treat the acceptance as meant for him. The acceptance of an offer not directed to the acceptor may occur by accident, as where a man's successor in business receives an order addressed to his predecessor by a customer who does not know of the change, and executes it without explaining the facts. Here no contract is formed (#). But the buyer would be bound, as on a new contract, if after notice he treated the sale as subsisting (y). This kind of case is very unusual. Acceptance intended for a person other 0) George Whitechurch, Ltd. v. (a?) Soulton v. Jones (1857) 2 H. & N. Cavanagh [1902] A. C. 117; Ruben v. 564, Finch, S. C. 450. See Benjamin on Great Fingall Consolidated [1904] 2 Sale, 5th ed. 95, 96, where the learned K. B. 712, C. A. author's suggestion of some different (f) The current Anglo-Indian spelling equitable rule is not supported by his -noshin is a mere blunder. It does not latest editors. The present writer was even represent a current mispronuncia- never able to accept it. tion. (y) See Mitchell v. Lapage (1816) (M) Annoda Mohun. Eai v. Bhutan Holt, N. P. 253, 17 R. R. 633. Mohini Deli (1901) 28 Cal. 546, 548. ERROR AS TO PERSON OF OTHER PARTY. 69 than the person actually making the offer might possibly happen by S. 13. accident, but in the reported cases it has been the result of fraudulent personation. The proposer has obtained credit, in effect, by pretending to be some person of credit and substance known to the acceptor, or the agent of such a person. In Gundy v. Lindsay (z), one Blenkarn closely imitated the address of a known respectable firm of Blenkiron & Co., and wrote his signature so as to look like theirs. A dealer to whom he wrote to order goods thought, as Blenkarn intended, that the order came from Blenkiron & Co., and sent the goods to the address given. It was held by the Court of Appeal and the House of Lords that, as the senders thought they were dealing with Blenkiron & Co., and knew nothing of Blenkarn, and had no intention of dealing with him, there was no contract, and Blenkarn acquired no property in the goods. Accordingly an innocent buyer of the goods stolen goods, as they really were from Blenkarn had no defence to an action by the original owners. Similarly, in a Punjab case, where A. entered into a contract wibh B., a brother of 0., on the representa- tion of B. that he was C. himself, the Chief Court of the Punjab held that the case was one within this section, and that there was no contract between A. and B. (a). It may be- a delicate question in a case of this kind, if the transaction is between parties face to face, whether A.'s intent is to contract with the man then and there present, whatever he calls himself, or to contract only with C., the person with whom he thinks he is dealing. Some American authorities hold that an agreement with a person " identified by sight and hearing " is not absolutely void, though personation may render it voidable on the ground of fraud ; but it is submitted as the better opinion that, although proof that there was no intention of contracting with the personator may be harder in such a case, the question is still a question of fact. On the same principle, if a man is induced to apply for shares in a company by falsely representing it to be identical with an older company of like name, there is no real agreement to take the shares (6). As to the subject-matter of the agreement. It is quite possible for the parties to a contract to be under a common mistake of this kind. If the mistake is not common, it may happen, in very exceptional cases, that by reason of an ambiguous name, or the like, each party is mistaken as to the other's intention, and neither is estopped from showing his own (z) (1878) 3 App. Ca. 459, Finch, S. C. not, of course, have been bound to accept 441. QiKsre, what would have been the them. result if by some lucky accident the (a) Jayyannath v. Secretary of State goods had been delivered to Blenkiron & (1886) Punj. Rec.no. 21. Co. ? It seems they might have treated (b) Saillle's Case [1898] 1 Ch. 110. the goods as offered to them. They could 70 THE INDIAN CONTRACT ACT. Ss. 13, 14. intention (c). Otherwise a contract (assuming the other conditions for the formation of a contract to be satisfied) can be affected by such a mistake, not common to both parties, only where it is induced by fraud or misrepresentation. We shall find (see below on s. 18) that wilful acquiescence in the other party's mistake is equivalent to misrepresentation under certain circumstances. If the mistake is common, it can seldom, if ever, be said that there was no consent. A simpler and more correct explanation is to say that there was an agreement subject to a condition understood or implied in the nature of the agreement itself, though not expressed, and that condition has not been fulfilled. It may be that at the date of the agreement the condition is already incapable of fulfilment by reason of some fact unknown to the parties ; as in the case of an agreement for the sale of a horse which in fact is dead, or a specific cargo which in fact is> lost. In that case no operative obligation ever arises under the agreement. But this may be the case with any conditional contract. The interposition of a time of suspense, during which it cannot be known whether there will be an operative contract or not, can make no difference to the legal nature of the transaction. This particular class of cases, however, is specially dealt with by s. 20 of the Act. In many cases falling under the foregoing heads, though not in all, the same result may be arrived at by observing that there is no consideration for the promise which it is sought to enforce. Coercion wholly excluding Consent. Coercion might possibly be such as not only to prevent consent from being free (ss. 14, 15), but to exclude any real or intelligent consent altogether. In two English cases of our own time marriages have been declared void, in extremely peculiar circumstances, on the ground of combined fraud and coercion having operated on the pretended wife to such an extent that the marriage was not her voluntary act (d). No case of this kind is known to have occurred in the region of ordinary contract. 14. Consent is said to be free when it is not caused by "Free consent" W coercion, as defined in section 15, or defined> (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (c) Raffles v. Wichelhaus, note (a), p. 63, sense, and there was no contract, above ; Faleh v. Williams [1900] A. C. (d) Scott v. SebrigM (1886) 12 P. D. 21 ; 176, where an offer made by an ambiguous Ford v. Stier [1896] P. 1, where the code message was accepted uncondition- woman thought the ceremony was only a ally, but in fact not in the proposer's betrothal. UNFREE CONSENT. 71 (4) misrepresentation, as denned in section 18, or Ss. 14, 15. (5) mistake subject to the provisions of sections 20, 21, and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake. Unfree Consent. Not only consent but free consent is declared by s. 10 to be necessary to the complete validity of a contract. The Act now proceeds to declare the meaning of this addition. Where there is no consent or no real and certain object of consent (cf. s. 29, p. 177, below) there can be no contract at all. Where there is consent, but not free consent, there is generally a contract voidable at the option of the party whose consent was not free. This section declares in general the causes which may exclude freedom of consent, leaving them to be more fully explained by the later sections referred to in the text. In one respect the language is open to objection. It seems, when read together with that of other relevant sections, to assume that there are cases in which a contract is voidable on the ground of mistake. We are not aware of any such cases. We have seen that certain kinds of mistake may exclude consent altogether. In such cases no real agreement is ever formed, or there is no real object on which the parties are agreed, and the seeming agreement is wholly void. Other- wise mistake, if not induced by misrepresentation or fraud, is inoperative. If there be any specific exceptions to this rule, the Act gives no clue to them; in fact, we do not believe there are any. The specific provisions of the Act, however, cover the ground sufficiently to avoid any danger of serious error in practice. 15. "Coercion" is the committing, or threatening to coercion " commit, any act forbidden by the Indian Penal defined. Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person what- ever, with the intention of causing any person to enter into an agreement. Explanation. It is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed. Illustrations. A., on board an English ship on the high seas, causes B. to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code. 72 THE INDIAN CONTRACT ACT. S. 15. A. afterwards sues B. for breach of contract at Calcutta. A. has employed coercion, although his act is not an offence by the law of England, and although s. 506 of the Indian Penal Code was not in force at the time when or place where the act was done. Extent of " Coercion " under the Act. The words of this section are far wider than anything in the English authorities ; it must be assumed that this was intended. In the original draft the word " coercion " is used but not defined. As the definition stands the coercion invalidating a contract need not proceed from a party to the contract, or be immediately directed against a person whom it is intended to cause to enter into the contract or any member of his household, or affect his property, or be specifically to his prejudice. In England the topic of " duress " at common law has been almost rendered obsolete, partly by the general improvement in manners and morals, and partly by the development of equitable juris- diction under the head of Undue Influence. Detaining property is not duress. Two singular recent cases of marriage under coercion have been cited under s. 13 (p. 70, above). Act forbidden by the Penal Code. The words " act forbidden by the Indian Penal Code " make it necessary for the Court to decide in a civil action, if that branch of the section is relied on, whether the alleged act of coercion is such as to amount to an offence. The mere fact that an agree- ment to refer matters in dispute to arbitration was entered into during the pendency and in fear of criminal proceedings is not sufficient to avoid the agreement on the ground of " coercion," though the agreement may be void as opposed to public policy within the meaning of B. 23 (e). It must further be shown that the complainant or some other person on his behalf took advantage of the state of mind of the accused to apply pressure upon him to procure his consent (/). So far as we are aware, there is no Indian case decided with express reference to the branch of the section now under consideration. In Banda All v. Banspat Singh (g), the High Court of Allahabad refused to enforce a bond executed by a judgment debtor in favour of the decree-holder to procure his release from custody in execution of a decree of a Court which had no jurisdiction to entertain the suit. The Court held that the bond was obtained when the judgment debtor was in duress, and it could be said with some amount of certainty that the decision proceeded on the ground (though no reasons are stated) that the alleged act of coercion amounted to an offence within the meaning of (e) Gobardhan Das v. Jai Kishen Das Merionethshire Building Society [1892] 1 (1900) 22 All. 224 ; Masjidi v. Mussammat Ch. 1 73. Ayisha (1882) Pimj. Rec. no. 135. () (1882) 4 All. 352. (/) 22 All. p. 227, citing Jones v. ACT FORBIDDEN BY THE PENAL CODE. 73 the Penal Code (h). The judgment of the High Court, so far as it holds S. 15. that the bond was executed under coercion, seems open to question as involving the assumption that the arrest of a judgment debtor in execution of an apparently regular decree amounts to the offence of wrongful confine- ment if the Court is ultimately found to have no jurisdiction. This would be a dangerous doctrine to adopt in India, where the majority of suitors consist as a rule of illiterate and ignorant persons who cannot be expected to understand the respective jurisdictions of the Courts of various grades spread over different parts of the country. In the next place, assuming that the defendant abetted the offence of wrongful confinement, it does not appear that he did it with the intention of causing the plaintiff to execute the bond, though the plaintiff may have signed the bond with the object of procuring his release from custody. There is yet another case which might be considered under the present head. In that case (i) the High Court of Madras held that an adoption by a Hindu widow thirteen years old (fc) was not binding upon her, it having been found that the relatives of the adopted boy obstructed the removal of the corpse of her husband from her house until she consented to the adoption. The decision proceeded on the ground that the widow's consent to the adoption was not free. The Court seems to have thought that the act of the relatives in obstructing the removal of the corpse was within the present section as being forbidden by the Indian Penal Code, but it does not appear under what section of the Code they would have held it punishable. The only section possibly applicable to obstructing the removal of a corpse would seem to be s. 297, which enacts inter alia that whoever with the intention of wounding the feelings of any person, or with the knowledge that the feelings of any person are likely to be wounded, offers an indignity to any human corpse, or causes disturbance to any persons assembled for the performance of funeral ceremonies, is liable to imprisonment or fine or both. On the facts of the case there could hardly be any doubt that the act was done with intent to wound the widow's feelings, or at any rate with the knowledge that her feelings would be wounded. The fact, therefore, would constitute an offence if obstructing the removal of the corpse could be regarded as an indignity offered to the corpse, or as a disturbance to the persons assembled to perform the funeral ceremonies. The act constituting coercion did not proceed from any party to the agreement, but the words of the section, as (/O See extract from judgment of the 1875 does not affect the capacity of any District Judge at p. 354 of the report. person to act in matters of adoption (0 Ranyaiuiyaltamma v. Alwar Setti (s. 2). The capacity to adopt is deter- (1889) 13 Mad. 214. mined by the personal law to which the (7i) The Indian Majority Act IX of party adopting is subject. 74 THE INDIAN CONTRACT ACT. Ss. 15, 16. pointed out above, make this immaterial. In any event there would have been no difficulty in holding that the widow's consent was obtained by undue influence within the meaning of s. 16 of the Act. 16, (1) A contract is said to be induced by " undue in- " Undue influ- fluence " where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. (2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another (a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other ; or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress. (3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872. Illustrations. (a) A., having advanced money to his son, B., during his minority, upon B.'s coming of age obtains, by misuse of parental influence, a bond from B. for a greater amount than the sum due in respect of the advance. A. employs undue influence. (b) A., a man enfeebled by disease or age, is induced, by B.'s influence over him as his medical attendant, to agree to pay B. an UNDUE INFLUENCE. 75 unreasonable sum for his professional services. B. employs undue S. 16. influence. (c) A., being in debt to B., the money-lender of his village, con- tracts a fresh loan on terms which appear to be unconscionable. It lies on B. to prove that the contract was not induced by undue influence. (d) A. applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A. accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence. This section was substituted for the original s. 16 by the Indian Contract Act Amendment Act VI of 1899, s. 2. The section before it was amended stood as follows : " ' Undue influence ' is said to be employed in the following cases : " (1) When a person in whom confidence is reposed by another, or who holds a real or apparent authority over that other, makes use of such confidence or authority for the purpose of obtaining an advantage over that other which, but for such confidence or authority, he could not have obtained ; " (2) When a person whose mind is enfeebled by old age, illness, or mental or bodily distress, is so treated as to make him consent to that to which, but for such treatment, he would not have consented, although such treatment may not amount to coercion." There were no illustrations appended to the old section. Illustra- tions (a) and (b) of the present section are elementary law (I). They were intended to be added to the section in its original form, but for some reason withdrawn before the Act was passed. Illustrations (c) and (d) are evidently intended to explain the application and the limits of par. 3. The doctrine of Undue Influence in England. "The equitable doctrine of undue influence has grown out of and been developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud " (m). It applies alike to acts of pure bounty by way of gift and to transactions in the form of contract which are clearly more advantageous to one party than to the other. In combination with other special rules it may even be applied to trans- actions which do nob show on the face of them any " unfair advantage." The sixteenth section of the Act, as it stood till 1899, did not adequately (0 As to the relation between medical impeachable by subsequent confirmation : attendant and patient, see Dent v. Bennett Mitchell v. Ilomfray (1881) 8 Q. B. Div. (1839) 4 My. & Or. 269, 48 R. R. 94. A 587. gift of this kind may of course (like any (/.) Lindley, ~L.J.,inAllcardv. Skinner other voidable transactions) become un- (1887) 36 Ch. Div. 145, 183. 76 THE INDIAN CONTRACT ACT. S. 16. represent the generality of the EngliSh doctrine. In fact, however, one at least of the Indian High Courts acted boldly and beneficially on the general principles of English equity without fettering itself by the precise words of the Act. Another defect now remedied was that nothing was said in the Contract Act about the important question of burden of proof, and magistrates and practitioners were left to discover for themselves that tlie real working strength of this section could be understood only by reading it with s. Ill of the Evidence Act. The English authorities are numerous, and many of them are compli- cated by questions on the one hand of actual fraud or on the other hand of breach of some special duty, such as that of an agent, which is independent of the state of mind of the parties. It will be sufficient for the present purpose to refer to a few of the leading authorities on the various points dealt with by the text of the Act. The first paragraph of the section lays down the principle in general terms ; the second and third define the presumptions by which the Court is enabled to apply the principle. It is obvious that the same power which can " dominate the will " of a weaker party is often also in a position to suppress the evidence which would be required to prove moral constraint in a specific instance. Modification of the ordinary rules of evidence is accordingly necessary to prevent a failure of justice in such cases. Where the special presumptions do not apply, proof of undue influence on the particular occasion remains admissible, though strong evidence is required to show that, in the absence of any of the relations which are generally accompanied by more or less control on one side and submission on the other, the consent of a contracting party was not free. In the case of a pure voluntary gift (though there is no general presumption against the validity of gifts) the proof is less difficult ; but this is not within our subject. Sub-s. 1 : Undue Influence generally. The first paragraph gives the elements of undue influence : a dominant position and the use of it to obtain an unfair advantage. The words " unfair advantage " must be taken with the context. They do not limit the jurisdiction to cases where the transaction would be obviously unfair as between persons dealing on an equal footing. " The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed " (w), or, as Sir Samuel Romilly expressed it in his celebrated argument in Huguenin v. Baseley, which has been made authoritative by repeated judicial approval (0), (n) Lord Kingsdown in Smith v. Kay ence or other defined fiduciary relation. (1859) 7 H. L. C. 750, at p. 779. This (o) (1807) 14 Ves. 285 ; 9 R. R. 283 ; was a case of general control obtained by 48 R. R. 102; per Wright, J., [1893] 1 an older man over a younger one during Ch. 752. his minority without any spiritual influ- UNDUE INFLUENCE. 77 " to all the variety of relations in which dominion may be exercised by S. 16. one person over another." "As no Court has ever attempted to define fraud, so no Court has ever attempted to define undue influence, which includes one of its many varieties" (p). But the English cases on the subject have been said by the same authority to be divisible into two groups, according as the charge against the donee (to use this word for shortness' sake) was of aggressive circumvention or of abusing the opportunities given by a duty. " First, there are the cases in which there has been some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by a donee placed in some close and confidential relation to the donor. . . . " The second group consists of cases in which the position of the donor to the donee has been such that it has been the duty of the donee to advise the donor or even to manage his property for him. ... In this class of cases it has been considered necessary to show that the donor had independent advice, and was removed from the influence of the donee when the gift to him was made " (q). Sub-s. 2 : Different forms of influence. The second paragraph of the present section makes a division of the subject-matter on a different principle, according to the origin of the relation of dependence, continuing or transitory, which makes undue influence possible. Such a relation may arise (a) from a special authority or confidence committed to the donee, or (b) from the feebleness in body or mind of the donor. However, it is impossible to find plain and clear-cut categories for transactions which are often obscure and complicated, and sometimes purposely made so. Practically the most important thing to bear in mind is that persons in authority, or holding confidential employments such as that of a spiritual, medical, or legal adviser, are called on to act with good faith and more than good faith in the matter of accepting any benefit (beyond ordinary professional remuneration for professional work done) from those who are under their authority or guidance. In fact, their honourable and prudent course is to insist on the other party taking independent advice (r). Following these (jo) Lindley, L. J., in Allcard v. Skinner following and explaining Rhodes v. Bate (1887) 36 Ch. Div. at p. 183. (1865) L. R. 1 Ch. 252, and other earlier (?) 36 Ch. Div. at p. 181. authorities; and the Court must also be 00 In the case of a gift from client to satisfied that the influence has in fact solicitor it is an essential condition to the ceased : Wright v. Carter [1903] 1 Ch. validity of the gift that the client should 27. It is hardly too much to say that have competent independent advice : such a gift, whatever it may be in Liles v. Terry [1895] 2 Q. B. 679, C. A., form, is practically revocable. The 78 THE INDIAN CONTRACT ACT. S. 16. principles, the High Court of Allahabad set aside a gift of the whole of his property by a Hindu well advanced in years to his guru, or spiritual adviser, the only reason for the gift as disclosed by the deed being the donor's desire to secure benefits to his soul in the next world (s). Similarly, where a cestui que trust had no independent advice, it was held that a gift by him to the trustee of certain shares forming part of the trust funds was void, though in the same case a gift of shares which did not form part of the trust funds was upheld (). The case of Wajid Khan v. Ewaz Ali (ii\ in which the Judicial Committee set aside a deed of gift executed by an old illiterate Mahomedan lady in favour of her confidential managing agent, comes under this head. And so does the case in which the High Court of Bengal refused to enforce an agreement executed by a poor woman in favour of her mooJchtear by which she bound herself to give him, by way of remuneration for his services, one half of the property which she might recover by his assistance (). The same principles apply to agreements for remuneration between an attorney and a client (y) and between a managing clerk in an attorney's office and a client (2). A parent stands in a fiduciary relation towards his child, and any transaction between them by which any benefit is procured by the parent to himself or to a third party at the expense of the child will be viewed with jealousy by courts of equity, and the burden will be on the parent or third party claiming the benefit of showing that the child in entering into the transaction had independent advice, that he thoroughly understood the nature of the transaction, and that he was removed from all undue influence when the gift was made. Upon these principles the High Court of Madras refused to enforce against an adopted son a deed of trust of joint family property executed by him and his adoptive father whereby annuities were created in favour of certain relations of the father, in a suit brought by them after the father's death to recover arrears of annuities. The deed was executed by the son soon after he attained majority, and there was no evidence to show that the son had independent advice, or that he understood the nature of the transaction, or that his father's influence had ceased when the document principle of Liles v. Terry was followed s. 53. in Rajah Papamma Row v. Sitaramayya (u) (1891) 18 Cal. 545 ; L. R. 18 Ind. (1895) 5 Mad. L. J. 234. Ap. 144. (#) Mannu Singh, v. TJmadat Pande (x) Pushong v. Munm Halwani (1868) (1890) 12 All. 523. 1 B. L. R. A. C. 95. (f) Raghunath v. Varjivandas (1906) (y) Brqjendra Nath v. Sreemutty Luclt- 30 Bom. 578 ; Knight v. Marjoribanks hey Money (1901) 60. W. N. 816. (1849) 2 Mac. & G. 10 ; 2 H. & Tw. 308. (z) Hamralabhdas v. Bhai Jivanji As to purchase by a trustee from a (1902) 26 Bom. 689. beneficiary, see Indian Trusts Act, 1882, MENTAL DISTRESS. 79 was executed (a). But the presumption of undue influence does not apply to S. 16. a gift by a mother to her daughter. If such a gift is sought to Be set aside on the ground of undue influence, the burden lies upon those who seek to avoid it to establish domination on the part of the daughter and subjection of the mother (&). Age and capacity are important elements in determining whether consent was free in the absence of any confidential relation, but as against the presumption arising from the existence of such a relation they count for very little (c). Clause (b) of this paragraph seems to include the principle, established by a series of English decisions, that "where a purchase is made from a poor and ignorant man at a considerable undervalue, the vendor having no independent advice, a court of equity wilV set aside the transaction " (d). Infirmity of body or mind on the vendor's part will make it still more difficult to uphold any such contract. As to the effect of inadequacy of consideration see s. 25, expl. 2, p. 148, below. Mental distress. " A state of fear by itself does not constitute undue influence. Assuming a state of fear amounting to mental distress which enfeebles the mind, there must further be action of some kind, the employment of pressure or influence by or on behalf of the other party to the agreement." The mere fact, therefore, that a submission was executed by the defendant during the pendency and under fear of a criminal prosecution instituted against him by the plaintiff will not avoid the transaction on the ground of " undue influence." It was so held by the High Court of Allahabad (e) in a case decided under the old section. The decision would, it seems, be the same under the section as it now stands. It could not be said in the case above that the plaintiff was in a position to dominate the will of the defendant merely by reason of the fact that criminal proceedings had been pending against the defendant at the time when the submission was executed by him ; nor is there anything to show in the facts of the case that the plaintiff used any such position to obtain an unfair advantage over the defendant. Both these elements are, however, present in the case where the High Court of Madras refused to enforce an agreement entered into by a Hindu widow to adopt a boy to her husband, it appearing on evidence that the relatives of the boy obstructed (a) Laltshmi Doss v. Roop Loll (1907) p. 257. 30 Mad. 169, in app. from 29 Mad. 1. As (d) Per Kay, J., Fry v. Lane (1888) 4 to transactions between a guardian and a Ch. D. 312, 322, the latest reported case ward, soon after the ward has ceased to of this class. be a minor, see Guardian and Wards Act, (e) Gobardhan Das v. Jai Kishcn Das 1890, s. 20. (1900) 22 All. 22-i. See also Masjidl v. (J) Ismail Mussajee v. Hafiz Boo Mussammat Ayisha (1882) Punj, Rec. (1906) 33 Gal. 773, L. K. 33 Ind. Ap. 86. no. 135. (c-) Rhodes v. Sate, L. E. 1 Ch. at 80 THE INDIAN CONTRACT ACT. S. 16. the removal of her husband's corpse from the house unless she consented to the adoption (/). The same elements are also to be found in the case where the Allahabad High Court set aside a deed of gift executed by an indigent Brahman to a temple of which the defendant had charge, it having been found that the gift left the donor without any means, and that the defendant had motives of personal gain in procuring it. The gift was made while the donor was living in the defendant's house, where he was fed and maintained by him, and during the pendency of a suit to recover the property prosecuted by the defendant on behalf of the donor at his own expense (g). In a Madras case where the plaintiff's agreed to relinquish their right to a religious office in favour of the defendant in consideration of the latter withdrawing a charge of criminal trespass preferred against them, it was held that the agreement was voidable, the charge of trespass being false, and the sole cause for entering into the agreement being " the well-founded terror of the influence of the prosecutor and of the civil death which would probably result from his proceedings " (h). Similarly where criminal proceedings were threatened against a mooJcadam for misappropriation of his master's moneys, and a bond was passed by an ignorant Hindu widow who had brought him up as her son to save him from the threatened prosecution, it was held that the agreement was not binding upon the widow, she having had no independent advice (t). Transactions with Parda-nishin women. From a time before, though not long before, the passing of the Contract Act, some of the High Courts, with a certain amount of support from the Judicial Committee, have treated parda-nishin women (sometimes in terms only Hindu women, but if a woman is in fact secluded it cannot matter whether she is a Hindu or not) as a class of persons specially exposed to undue influence, and have gone near to laying it down as a rule of law that every one dealing with a parda-nishin woman is bound to show affirmatively that she understood the nature of the transaction, and that the terms were fair. The rule was stated by the late Sir W. Rattigan, in a paper where he forcibly criticised this policy (k), to have been first enounced in 1867 in a Calcutta case not regularly reported. " It does not necessarily follow," Sir W. Rattigan observed, " that a native woman, simply because she sits behind the parda, (/) Ranganayaliamma v. Alwar Settl 566. See also Rangnath v. Gorind (1904 (1889) 13 Mad. 214. 28 Bom. 639. (0) Sital Prasad v. Parbhu Lai (1888) (&) " The Parda Nas/tin [sic~\ Woman 10 All. 535. and her Protection by British Courts of (A) Pudlshary Kri*hneu v. Karampally Justice," Journ. Com p. Legist., December, (1874) 7 M. H. C. 378. 1901, pp. 252, 257, 258. (1) Kessowji v. Hurjtian (1887) 11 Bom. PARDA-NISHIN CASES. 81 is to be placed in the same category as the ' weak, ignorant, and infirm S. 16. persons' whom the Court of Chancery, under a proper interpretation of its approved practice, is accustomed to protect. On the contrary, it is common experience to find in India parda ladies who are highly intelligent, strong- minded, and who possess excellent business capacity, and contrive to manage large estates with great success. To adopt a sweeping generalisation, and to hold that every parda nashin lady who enters into any commercial transaction, or who makes a disposition of her property, is presumably the victim of ' undue influence,' is to make an assumption which is contrary to actual facts, and to cause the law to be abused for the purpose of avoiding bond fide engagements." In the earliest Privy Council decision on the subject, where aMahomedan lady sued to recover from her husband the value of Company's paper of a considerable amount alleged to have been endorsed and handed over to him to receive interest thereon, and the defence was that he had purchased the paper from his wife, it was held by their Lordships that, though the wife failed to prove affirmatively the precise case set up by her in the plaint, the burden of proof was upon the husband to show, the plaintiff loeingaparda- nishin, that the sale was a. bond fide one for value, and that upon the evidence he had failed to satisfy the burden (T). A few years later it was declared by the same tribunal that, as regards deeds taken from parda women, the Courts have always been careful to see " that the party executing them has been a free agent, and duly informed of what she was about " (m). It is not sufficient to show that a document executed by a parda-nishin woman was read out to her ; it must further be shown that it was explained to her or that she understood its conditions and effect (ri). The reason is that the ordinary presumption that a person understands the document to which he has affixed his name does not apply in the case of a parda-nishin woman (0). There is one case which is unfavourable to the theory of presumed incapacity, but it may be said either that the burden of proof (7) Moonshee Buzloor Ruheem v. 132 ; Sumsuddin v. Abdul (1907) 31 S/ntmsoonissa Begum (1867) 11 M. I. A. Bom. 165. 551 . (0) Asligar All v. Delroos Banoo Begum 00 Geresh Chunder v. Blmggobutiy (1877) 3 Gal. 324 ; Mariam JBibi v. (1870) 13 M. I. A. 419, 431 ; Sudisht Lai Sahina (1892) 14 All. 8 ; Acchkan Kuar v. Sheolarat Koer (1881) 7 Cal. 245, L. R. v. Thakur Das (1895) 17 All. 125 ; Hoti 8Ind.Ap.39;JBehariLalv.HabibaBibi Lai v. Musammat (1903) Punj. Eec. (1886) 8 All. 267 ; Annoda Mohun Hal v. no. 77. In Ashgar All's case the Judicial Bkttban Mohini DcU (1901) 28 Cal. 546, Committee set aside a tauliatnama exe- L. R. 28 Ind. Ap. 71. cuted by a Mahomedan lady on the false 00 Shambati Koeri v. Jago Bibi(l902 representation that the effect of the 9 Cal. 749 ; Sham Koer v. Dah Koer document was what she desired. The (1901) ?9 Cal. 664, L. R. 29 Ind. Ap. case looks very like one of positive fraud. i.e. 6 82 THE INDIAN CONTRACT ACT. S. 16. was discharged, or that the charge of undue influence was discredited by being made as an afterthought, and not by the lady herself, but by her representative (p). But although, where it is sought to enforce a contract against o, parda-nishin lady, it is incumbent on the plaintiff to show that the contract was entered into by the lady after proper advice and with full understanding of its terms and effect, yet, where a parda-nishin lady seeks to set aside a contract under which there has been possession and enjoyment, the burden of proof lies on her of establishing at least a good primd facie title to the relief claimed, though the quantum of evidence in her case would not be the same as that required from any other plaintiff seeking to avoid his deliberate act (q). It appears on a review of the above decisions that most, if not all, of them could have been arrived at without the aid of any general presumption, on such grounds as that the act was done under the influence of marital control, or actual fraud or misrepresentation, or even in total ignorance of its nature and effect. The only thing in English law that seems analogous to the treatment of a parda-nishin woman's dealings as presumably invalid is the treatment of dealings with " expectant heirs " by Courts of Equity, where fraud is said to be " presumed from the circumstances and condition of the parties contracting." But this equitable doctrine is peculiar, and depends, in part at any rate, on peculiar reasons not existing in India (r). Who is a Parda-Nishin. The expression " parda-nishin " connotes complete seclusion. It is not enough to entitle a woman to the special care with which the Courts regard the disposition of a parda-nishin woman that she lives in some degree of seclusion (s). Thus a woman who goes to Court and gives evidence, who fixes rents with tenants and collects rents, who communicates, when necessary, in matters of business, with men other than members of her own family, could not be regarded as a parda-nishin woman (/). In Hodges v. The Delhi and London Bank, Limited (u), a Privy Council case, it was said : " It is abundantly clear that Mrs. Hodges was not a parda-nishin. The term quasi-parda-nishin seems to have been invented for this occasion. Their Lordships take it to mean a woman who, not being of the parda-nishin class, is yet so close to them in kinship and habits, and so secluded from (p) Mahomed BulisJi v. Hosseini JBibi () Shaih Ismail v. Amirbibi (1902) (1888) 15 Cal. 684, L. R. 15 Ind. Ap. 81. 4 Bom. L. R. 146, 148. (j) Naushanl Begam v. Intizar Begam (f) Ismail Mussajee v.ffajiz Boo (1906) (1899) All. W. N. 25. 53 Cal. 773, 783, L. R. 33 Ind. Ap. ; Shaik (r) See Pollock, Principles of Contract, Ismail v. Amirbibi (1902) 4 Bom. L. R. ed. 7, 622 sqq. O'Rorke v. Bolingbroke, 146. (1877) 2 App. Ca. 814, marks the limit of () (1901) 23 All. 137, 145, L. R. 27 its application. Ind. Ap. 168. UNCONSCIONABLE BARGAINS. 83 ordinary social intercourse, that a like amount of incapacity for business S. 16. must be ascribed to her, and the same amount of protection which the law gives to parda-nisTiins must be extended to her. The contention is a novel one, and their Lordships are not favourably impressed by it. As to a certain well-known and easily ascertained class of women, well-known rules of law are established, with the wisdom of which we are not now concerned ; outside that class it must depend in each case on the character and position of the individual woman whether those who deal with her are or are not bound to take special precautions that her action shall be intelligent and voluntary, and to prove that it was so in case of dispute." Sub-s. 3 : Rule of Evidence. The third paragraph of the present section does not lay down any rule of law, but throws the burden of proving freedom of consent on a party who, being in a dominant position, makes a bargain so much to his own advantage that, in the language of some of the English authorities, it " shocks the conscience." Money-lending cases are those chiefly contemplated (see illustration (c) ). In fact, the language of the section as amended only declares what the High Courts, with or without literal authority, but acting in the spirit of the English equitable doctrine, have been doing for many years. It must not be supposed, however, that there may not be other forms of unconscionable bargain within the mischief and the remedy of this enactment. " Unconscionable bargains." Illustration (c) contemplates the case of a person already indebted to a money-lender contracting a fresh loan with him on terms on the face of them unconscionable. In such a case a presumption is raised that the borrower's consent was not free. The pre- sumption is rebuttable, but the burden of proof is on the party who has sought to make an exorbitant profit of the other's distress. The question is not of fraud, but of the unconscientious use of superior power. Inadequacy of consideration, though it will not of itself avoid a contract (s. 25, expl. 2, below), has great weight in this class of cases as evidence that the contract was not freely made. As observed in a recent Bombay case, " inadequacy of consideration in conjunction with the circumstances of indebtedness and ignorance were facts from which it would have been as permissible before the amendment of [this section] to infer the use of undue influence as it would be since that amendment " (x). Relief in cases of unconscionable bargains is an old head of English equity. It was formerly associated in a special manner with sales of reversionary interests, which the Court was eager to restrain ; and for some time it was the doctrine of the Court that a sale of any reversionary interest, if proved to have been made for only a little under the value, must be set aside without further O) Bliimbhat v. Yeshwantrao (1901) 25 Bom. 126, 128. 62 84 THE INDIAN CONTRACT ACT. S. 16. inquiry. This rule was at last found so inconvenient that it was abolished by statute. But the general principles of equity in dealing with what are called " catching bargains" remain, and the third clause of the section now before us is apparently intended to embody them. In fact, the Indian High Courts had acted on these principles, both before and since the passing of the Contract Act, without any express letter of written law to justify them in so doing. Thus where the interest was exorbitant, relief was granted by reducing the rate of interest in cases where the loan was made to an illiterate peasant (y), and to a Hindu sixteen years old (z) (but not a minor according to the Hindu law). And where an heir to an estate borrowed Rs. 3,700 to enable him to prosecute his claim at a time when he was without even the means of subsistence, and gave the lender a bond for Rs. 25,000 to be paid after receiving possession of the property, the Court held that the bargain was hard and unconscionable, and gave the lender a decree for Rs. 3,700, with interest at 20 per cent, per annum (a). Acting upon the same principles, the High Court of Bombay has held that a covenant in a mortgage executed by illiterate peasants in favour of a money- lender to sell the mortgaged property to the mortgagee at a gross under- value in default of payment of interest was inequitable and oppressive, and the mortgage was set aside to that extent (V). The doctrine above enunciated was applied in a recent case decided since the amendment of the present section, where the High Court of Allahabad disallowed compound interest payable at 2 per cent, per mensem with monthly rests in the case of a bond executed by a spendthrift and a drunkard eighteen years old (c). And where a person twenty-eight years old, the son of a wealthy father, but of profligate habits and greatly in need of money, his father having refused to provide him with any money, executed a bond to secure a sum of Rs. 500 with interest at the rate of Rs. 37-8 per cent, per annum with six- monthly rests, with a stipulation that the borrower should not be empowered to pay the money within three years, and if he did pay within three years, he should nevertheless be obliged to pay three years' interest at the rate (y) Lalli v. Ram Prasad (1886) 9 All. (a) Chunni Ruar v. Rvp Singh (1888) 74. See also the observations of the 11 All. 57, confirmed on appeal sub nom. Judicial Committee in Kamini v. Kali- Raja Mohkam Singh v. Raja Rup Singh prossunno Ghose (1885) 12 Cal. 225, 238, (1893) 15 All. 352, 20 Ind. Ap. 127. See 239, L. R. 12 Ind. Ap. 215, where the loan also Husaln Bakhsh v. Rahmat Husain was made to a parda-nishin lady. (1888) 11 All. 128. (z) Mothoormohun Roy v. Soorendro (i) Kedari Bin Ranu v. AtmarambJtat Aarain Deb (1875) 1 Cal. 108. The (1866) 3 B. H. C. A. C. 11. Indian Majority Act, which fixes the age (c) Kirpa Ram v. Sami-ud-din (1903) of majority at sixteen, was not passed till 25 All. 284. 1879. UNCONSCIONABLE BARGAINS. 85 above mentioned, the same Court held that the bargain was unconscionable, S. 16. and gave the lender a decree for Rs. 500 with simple interest at the rate of 24 per cent, per annum (d). Similarly, where a talukdar, who had been declared a "disqualified proprietor" under the provisions of the Oudh Land Revenue Act, 1876, and whose property was placed in the charge of the Court of Wards on the ground of his indebtedness and consequent inability to manage it, executed a bond for Rs. 10,000, repayable with interest at 18 per cent, per annum and compound interest in default of payment of instalments, the Judicial Committee disallowed compound interest on the ground that the position of the parties was such that the lender was " in a position to dominate the will " of the borrower, and that the charging of compound interest in the circumstances of the case was "unconscionable " (e). The relief, however, has not been confined to money-lending transactions, and so far back as the year 1874 the Judicial Committee set aside a bond obtained by a powerful and wealthy banker from a young zamindar who had just attained his majority, and had no independent advice, by threats of prolonging litigation commenced against him by other persons with the funds and assistance of the banker (/). Three years later the same tribunal set aside an ikrarnama executed by a minor and another who had just come of age of half of their property in favour of the defendants, who had no title to the property, and who had taken possession thereof by show of force and with the assistance of a large body of retainers (g). Similarly, where the plaintiff, an illiterate agricul- turist heavily indebted to the defendant, who was a money-lender, passed a sale-deed to the defendant of his lands worth thrice the amount of the debt under pressure of payment, the High Court of Bombay ordered by its decree that the sale should be set aside on the plaintiff paying to the defen- dant the debt owed by him within a fixed period (K). But the question whether a transaction should be set aside as being inequitable depends upon the circumstances existing at the time of the transaction, and not on subsequent events (z). As between parties on an equal footing high interest, and even the holding of securities for a greater sum than has been actually advanced, will not suffice to make the Court hold a bargain unconscionable. Where both (<) Mad/to Singh v. Kashi Ram (1887) Cal. 233 ; Chairing v. Whitchurch (1907) 9 All. 228 and Poma Dongra v. William 32 Bom. 208. The decisions to the Glllespie (1907) 31 Bom. 348. contrary in Madho Singh v. Kashi Rum () Mackintosh v. Wingrove (1879) 4 (1887) 9 All. 228 and Poma Dongra v. Cal. 137 ; Satish Chunder v. Hem Chunder William Gillespie (1907)31 Bom. 348 can (1902) 29 Cal. 823; Umesh Chandra v. no longer be regarded as good law. The Golap Lai (1903) 31 Cal. 233 ; Kirti decision in Madho SingWs case was ex- Chunder v. Atkinson (1905) 10 C. W. N. pressly dissented from by the High Court 640; Tarachand v. Girdhari Lai (1889) of Calcutta in Umesh Ch a ndra's case. In All. W. N. 167 ; Hem Raj v. Khuda Poma Dongra's case the point of law, if liahhsh (1905) Punj. Rec. no. 13. UNDUE INFLUENCE : ACQUIESCENCE. 87 It may be observed, before leaving this subject, that the Courts of S. 16, British India ought to decide cases under this section according to its terms, and to resort to English decisions only so far as they illustrate its provisions. This warning was given by the Judicial Committee in Dhanipal Das v. Maneshar BaTchsh Singh (0), where their Lordships said: " The Subordinate Judge was wrong in deciding the case in accordance with what he supposed to be English equitable doctrine. He ought to have considered the terms of the amended section 16 only. He also mistook the English law. Apart from a recent statute, an English Court of Equity could not give relief from a transaction or contract merely on the ground that it was a hard bargain, except perhaps where the extortion is so great as to be of itself evidence of fraud. ... In other cases there must be some other equity arising from the position of the parties or the particular circumstances of the case." Lapse of time and limitation. Delay and acquiescence do not bar a party's right to equitable relief on the ground of undue influence, unless he knew that he had the right, or, being a free agent at the time, deliberately determined not to inquire what his rights were or to act upon them (p)^ Lapse of time is not a bar in itself to such a relief. There must be conduct amounting to confirmation or ratification of the transaction (q). If there be no such conduct, it is open to the party, though he may not sue to set aside the transaction within the period of limitation, to plead undue influence as a defendant in a suit brought against him to enforce the transaction. As observed by Sir Lawrence Jenkins, C. J., " A defendant in a suit is entitled to resist a claim made against him by pleading fraud [or undue influence] , and he is entitled to urge that plea though he may not have himself brought a suit to set aside the transaction, and is not, in circumstances like the present, precluded from urging that plea by the [law of limitation] " (r). This statement of the law was adopted in a recent Madras case where it was said : " We do not think it follows that because a party's remedy as plaintiff to have an instrument avoided is time-barred, his right to say by way of equitable defence, if sued, that the instrument 00 (1906) 28 All. 570, L. R. 33 Ind. Ap. his position to demand more onerous 118. The relief granted below was sub- terms than were reasonable." stantially confirmed on the ground that (p) Lakshmi Doss v. Hoop Loll (1907) the facts brought the case within the 30 Mad. 169. section. The borrower "was under a (#) Allcard v. Skinner (1887) 36 Ch. peculiar disability and placed in a posi- Div. 145, at pp. 181, 182, 186 ; Wright v. tion of helplessness by the fact of his VanderplanTt (1856) 8 D. M. & G. 133. estate being under the control of the (?) Rangnatk SaUaram v. Gorind Court of Wards," and " the lender used Naraslnv (1904) 28 Bom. 639. 88 THE INDIAN CONTRACT ACT. Ss. 16, 17. ought not to be enforced is equally time-barred " (s). This is in entire accordance with the authorities familiar in English equity practice, to which it is needless to make further reference. 17. Fraud " means and includes any of the following acts committed by a party to a contract, or "Fraud "defined. . J with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract : (1) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true ; (2) the active concealment of a fact by one having knowledge or belief of the fact ; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive ; (5) any such act or omission as the law specially declares to be fraudulent. Explanation. Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. Illustrations. (a) A. sells, by auction, to B., a horse which A. knows to be unsound. A, says nothing to B. about the horse's unsoundness. This is not fraud in A. (b) B. is A.'s daughter and has just come of age. Here, the relation between the parties would make it A.'s duty to tell B. if the horse is unsound. (c) B. says to A. "If you do not deny it, I shall assume that the horse is sound." A. says nothing. Here A.'s silence is equivalent to speech. (d) A. and B., being traders, enter upon a contract. A. has private information of a change in prices which would affect B.'s willingness to proceed with the contract. A. is not bound to inform B. Fraud in general. Fraud is committed wherever one man causes another to act on a false belief by a representation which he does not 0) LaksJimi Doss v. Roop Loll (1907) 30 Mad. 169, 178. FRAUD. 89 himself believe to be true. He need not have definite knowledge or belief that it is not true (t). When fraud produces damage it is generally a wrong entitling the person defrauded to bring a civil action. Under the Contract Act we are concerned with the effects of fraud only so far as consent to a contract is procured by it. We have already pointed out that the result of fraudulent practice may sometimes be a complete misunder- standing on the part of the person deceived as to the nature of the transaction undertaken, or the person of the other party. Such cases are exceptional. Where they occur, there is not a contract voidable on the ground of fraud, but the apparent agreement is wholly void for want of consent, and the party misled may treat it as a nullity even as against innocent third persons. But the fraudulent party is of course estopped from denying that there is a contract if the party deceived finds it to be his interest to affirm the transaction, which is a conceivable though not probable case. In the same way the party deceived must be at liberty to treat the transaction as a voidable contract if he thinks fit. No doubt many transactions have in fact been so treated notwithstanding that under the law as settled in Gundy v. Lindsay (u) they might have been declared wholly void. Sub-s. 3. The language of the Act throws no light on the relation of fraud to misrepresentation. It might even be said to obscure it. That relation, however, may be very simply stated. Fraud, as a cause for the rescission of contracts, is generally reducible to fraudulent misrepresenta- tion. Accordingly we say that misrepresentation is either fraudulent or not fraudulent. If fraudulent, it is always a cause for rescinding a contract induced by it ; if not, it is a cause of rescission only under certain conditions, which the definitions of s. 18 are intended to express. There are, however, forms of fraud which do not at first sight appear to include any misrepresentation of fact, and sub-ss. 3, 4, and 5 are intended to cover these. With regard to a promise made without any intention of performing it (sub-s. 3), it is not very difficult to say that a promise, though it is not merely a representation of the promisor's intention to perform it, includes a representation to that effect. Some promises are given more readily and willingly than others ; but we accept promises only because we believe them to be made in good faith, and no one would be content with a promise which he believed the promisor to have no inten- tion of keeping. Similarly it is fraud to obtain property, or the use of it, under a contract by professing an intention to use it for some lawful purpose when the real intention is to use it for an unlawful (0 This is well settled in England : 93 11. R. 732. Evam v. Edmonds (1853) 13 C. B. 777 (u) Note (z), p. 69, above. S. 17. 90 THE INDIAN CONTRACT ACT. S. 17, purpose (x). Our modern authorities have removed the difficulty which used to be felt in treating the statement of a man's intention as a representation of fact. " There must be a misstatement of an existing fact, but the state of a man's mind is as much a fact as the state of his digestion. It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but if it can be ascertained it is as much a fact as anything else." Accordingly it is fraud to obtain a loan of money by misrepresenting the purposes for which the money is wanted, even if there is nothing unlawful in the subject for which the money is actually wanted and used (y). In particular, it is well settled in England that buying goods with the intention of not paying the price is a fraud which entitles the seller to rescind the contract (z). On the whole, then, sub-s. 3 of the present section did not introduce any novelty (a). Sub-s. 4. The mention of "any other act fitted to deceive" in sub-s. 4 appears to be inserted merely for the sake of abundant caution. Acts and omissions specially declared to be fraudulent. Sub-s. 5 applies to cases in which the disclosure of certain kinds of facts is expressly required by law, and non-compliance with the law is expressly declared to be fraud. Thus by s. 55 of the Transfer of Property Act (IV of 1882) the seller of immovable property is required to disclose to the buyer " any material defect in the property of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover," and the buyer to disclose to the seller " any fact as to the nature or extent of the seller's interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which materially increases the value of such interest," and "omission to make such disclosures ... is fraudulent," and this, it seems, even if the omission be due merely to oversight. In England a similar duty of disclosure exists, and failure to fulfil it is a misrepresentation creating a right to rescind the contract; but, if not shown to be wilful, the omission would not be called fraudulent. Various dealings with property are made voidable as being fraudulent, or declared to be fraudulent as against the transferor's creditors or assignees, by other enactments. But, as these transfers of property cannot well be employed as inducements to any other party to enter into any contract beyond such agreement as is involved in (x) See Feret v. Hill (1854) 15 C. B. (z) Clowgh v. L. Sf N. W.R. Co. (1871) 207, which, admitting this, decided that L. R. 7 Ex. 21, in Ex. Ch. ; Ex parte the defrauded party, having given posses- Whittaker (1875) L. R. 10 Ch. at p. 449. sion, is not entitled to resume it by force (a) Borrowing money with no inten- without process of law. tion of repaying it is cheating under the (y) Edgington v. Fitzmaurice (1885) Penal Code : s. 416, illustration (f). 29 Ch. Div. 459, 480, 483, per Bowen, L. J. NON-DISCLOSURE. 91 the fraudulent transfer itself, they do not come within the scope of the Ss. 17, 18. Contract Act, and we have no occasion to dwell upon them here (b). Mere non-disclosure. There are special duties of disclosure (of which we have just seen an instance) in particular classes of contracts, but there is no general duty to disclose facts which are or might be equally within the means of knowledge of both parties. Silence as to such facts, as the Explanation to the present section lays down, is not fraudulent. There is a well-known American case on this point arising out of the conclusion of peace between Great Britain and the United States after the war commonly known as the war of 1812. The contract was for the sale of tobacco : the buyer knew, but the seller did not, that peace had been made ; and on the seller asking if there was any news affecting the market price, the buyer gave no answer. The Supreme Court of the United States held that there was nothing fraudulent in his silence (c). But there are at least two practical qualifications of this rule. First, the suppression of part of the known facts may make the statement of the rest, though literally true so far as it goes, as misleading as an actual falsehood. In such a case the statement is really false in substance, and the wilful suppression which makes it so is fraudulent (d). Secondly, a duty to disclose particular defects in goods sold, or the like, may be imposed by trade usage. In such a case omission to mention a defect of that kind is equivalent to express assertion that it does not exist (. Anson, 168 (7*) Smith v. Hughes (1871) L. R. 6 sqq. I cannot precisely agree with Sir Q. B. 597. W. Anson's historical view of the rules of (Z) Bchn v. Bitrness (1863) 3 B. & S. equity in England, but this is not material 751 (ship described in charter-party as in India. "now in the port of Amsterdam"); (/<) For a recent example see Turner v. Bannerman v. White (1861) 10 C. B. N. S. Green [1895] 2 Ch. 205. 844 (hops bought on terms of being free (0 Laidlaw v. Organ, 2 Wheat, at from treatment with sulphur), p. 195. 94 THE INDIAN CONTRACT ACT. S. 18. fact or affirmation the subject-matter of a warranty or collateral agree- ment, so that failure to make it good shall not avoid the principal contract, but only give a right to damages. This is exemplified by the ordinary warranties, express or implied, on a sale of specific chattels (m). In every case the question is what the parties really intended. Much perplexity would have been avoided if this principle, explicitly recognised only in the second half of the nineteenth century (w), had been understood earlier. Sub-s. 1. What is meant by "the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true " ? Many persons would say that, in any ordinary use of the English language, the assertion "of that which is not true, though it may be innocent and even free from negligence, cannot be " warranted " in any manner. Now the framers of the New York Civil Code put this clause under the head of Fraud. Probably what they meant was that a mis- representation made with reasonable and probable cause for believing it true should in no case be treated as fraud, but that a reckless or grossly negligent misrepresentation should be. The result would be to lay down a more stringent rule as to fraud than is sanctioned by English decisions in fact, some such rule as the Court of Appeal laid down in England but the House of Lords refused to adopt, in Derry v. Peek (0). When this clause is transferred to the head of Misrepresentation, it would seem to mean that innocent misrepresentation does not give cause for avoiding a contract unless the representation is made without any reasonable ground. The High Court of Calcutta, in a case not officially reported, has held that an assertion cannot be said to be "warranted" for the present purpose where it is based upon mere hearsay. Thus if A. makes a positive statement to B. that C. would be a director of a company about to be formed, and B. applies for shares on the faith of that statement, the statement would be a misrepresentation if A. did not derive the information from C. direct, but from a third party, D. (p). In the course of the judgment Maclean, C. J., said : " I need scarcely say that we must deal with this case according to the law of India and not of England, and if we find the term ' misrepresentation ' defined by statute in this country, we must do our best to ascertain whether the case is brought within that statutory definition . . . [A.] says that [D.] told him that he [D.] had authority (/) See the sections on Warranty (o) 14 App. Ca. 337, reversing judg- (109118) in the chapter on the Sale of ment of C. A., 37 Ch. Div. 541. Goods, below. (p) Mohun Lall v. Sri Gungqji Cotton () See note (I) on p. 93. Mills Co. (1899) 4 C. W. N. 369, MISREPRESENTATION. 95 from [C.] to use his name in the prospectus as a director, in other words, S. 18. that he [A.] obtained his information not from [0.] direct, but only through [D.]. I am not disposed to think that if [A.] had relied on the second-hand information he derived from [D.], he was 'warranted' in making the positive assertion that [C.] would be a director " ( is of such a nature that, if permitted, it would defeat the provisions of any law ; or is fraudulent ; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Illustrations. (a) A. agrees to sell his house to B. for 10,000 rupees. Here B.'s promise to pay the sum of 10,000 rupees is the consideration for A.'s promise to sell the house, and A.'s promise to sell the house is the consideration for B.'s promise to pay the 10,000 rupees. These are lawful considerations. (b) A. promises to pay B. 1,000 rupees at the end of six months if 0., who owes that sum to B., fails to pay it. B. promises to grant time to 0. accordingly. Here the promise of each party is the con- sideration for the promise of the other party, and they are lawful considerations. (c) A. promises, for a certain sum paid to him by B., to make good to B. the value of his ship if it is wrecked on a certain voyage. Here A.'s promise is the consideration for B.'s payment, and B.'s payment is the consideration for A.'s promise, and these are lawful considerations. (d) A. promises to maintain B.'s child, and B. promises to pay A. 1,000 rupees yearly for the purpose. Here the promise of each party is the consideration for the promise of the other party. They are lawful considerations. (e) A., B., and C. enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud. The agreement is void, as its object is unlawful. (a?) (1892) 16 Bom. 561. UNLAWFUL OBJECTS. 113 (f) A. promises to obtain for B. an employment in the public S. 23. service, and B. promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful. (g) A., being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B. a lease of land belonging to his principal. The agreement between A. and B. is void, as it implies a fraud by concealment by A., on his principal. (h) A. promises B. to drop a prosecution which he has instituted against B. for robbery, and B. promises to restore the value of the things taken. The agreement is void, as its object is unlawful. (i) A.'s estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B., upon an understanding with A., becomes the purchaser, and agrees to convey the estate to A. upon receiving from him the price which B. has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and would so defeat the object of the law. (j) A., who is B.'s mukhtar, promises to exercise his influence, as such, with B. in favour of 0., and 0. promises to pay 1,000 rupees to A. The agreement is void, because it is immoral. (k) A. agrees to let her daughter to hire to B. for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code. Unlawful objects. By s. 10 an agreement is a contract (i.e., enforce- able) only if it is made for a lawful consideration and with a lawful object. The present section declares what kinds of consideration and object are not lawful. Its phraseology is not happy (?/). Properly we speak of the consideration for a promise, not the consideration of an agreement. If I agree to sell you a piece of land for Us. 20,000, my promise to convey the land is the consideration for your promise to pay the price, and your promise to pay the price is the consideration for my promise to convey the land. There is nothing that can be called the consideration of the agreement between us as a whole. If we read " promise " for " agree- ment," the text becomes clearer ; and s. 2 (e) (p. 11, above), though that sub-section is itself not as clear as might be desired, appears to warrant us in doing this. See also illustration (a) to the present section. Recently Sale, J., pointed out (what indeed seems obvious) that the word " object " in this section wag not used in the same sense as " con- sideration," but was used as distinguished from "consideration " and meant " purpose " or " design." It was so observed in a case where A. had agreed (y) The illustrations correspond very inissioners in the first draft, cl. 10. The nearly to those framed by the Law Com- text is quite different. I.C. 8 114 THE INDIAN CONTRACT ACT. S. 23. to sell goods to B., and B. while in insolvent circumstances assigned the benefit of the contract to his brother-in-law C. for a consideration of Rs. 100, the object both of B. and C. being to defraud B.'s creditors. It was said that the consideration for the assignment, namely, the sum of Rs. 100, was lawful, but the object was unlawful, as it was to defeat the provisions of the Insolvency Act (z). With regard to a consideration being forbidden by law, it is to be observed that, where the consideration is a promise, it may be forbidden in one of two distinct senses. The promise may be of something which it would be unlawful to" perform ; and here it is perhaps simpler to say that the object of the agreement, namely, the unlawful performance, is forbidden. Sometimes, on the other hand, although there is nothing unlawful in performing the promise, a positive rule of law, founded on reasons of general expediency, will not suffer any legal obligation to arise from a promise of that kind. So it is in the cases of wagers, and of agreements in restraint of trade outside the limited sanction given to them. In such cases we shall say that the object of the agreement is not unlawful if by " object " we mean the actual performance ; but we shall say that it is unlawful if by " object " we mean the creation of an obligation to perform the things promised. This ambiguity is cot cleared up by anything in the language of the Act. It does not, however, seem material for any practical purpose. There is another possible reason, however, for the use of the word " consideration." A man may enter into a contract lawful in itself, and perform it in such a manner or by such means as to violate some distinct requirement or prohibition of the law. By so doing he may deprive himself of any claim to recover on the other party's promise to pay for his work, and this whether the other party knew anything beforehand of his unlawful action or not. Now in an agreement by mutual promises each of the promises is, properly speaking, the consideration, and the only considera- tion, for the other ; but in discussing the subsequent duties of the parties as to performance the word " consideration " is sometimes applied, in a loose and extended sense, to those cases where the duty of performance on the one part is, according to the original intent of the agreement, con- ditional on previous or simultaneous performance on the other. In this inaccurate but not uncommon sense it may be said that, when a promisor who might have performed his promise lawfully performs it unlawfully, the consideration for the reciprocal promise becomes unlawful ; and the language of the Act may have been designed to cover such cases. A (z) Jaffer MeJier All v. Budge Budge Jute Mills Co. (1906) 33 Cal. 702, 710, 8. c. on appeal (1907) 34 Cal. 289, UNLAWFUL OBJECT OR CONSIDERATION. 115 typical English example is Beasley v. Bignold(a), where a printer, having S. 23. put a false imprint on a pamphlet, instead of his true name and address, as required by statute, was not allowed to recover the price of his work. It does not appear whether the defendant was a party to the falsification or not, or for what purpose it was done. Here a personal and quasi-penal disability is imposed on the plaintiff for reasons of general policy without regard to the original character of the agreement, and with the result of conferring corresponding gain on the defendant, whose deserts may be no better in themselves. Practically it is convenient to treat these cases under the head of unlawful agreements, as the broad principles and the results are the same. Unlawful intention, like negligence, is not presumed by the law, nor is any man expected to presume it without evidence. Therefore, if a contract can on the face of it be lawfully performed, the existence of an undisclosed mtentio-n_-by one party to perform ib unlawfully, or use it as part of an unlawful scheme, will not disable the other party from enforcing it, at any rate by way of damages ; and if the construction is doubtful, that con- struction, which admits of a lawful performance is to be preferred. Again, if there exists or arises a legal impediment, unknown to the parties at the time of contracting, to the performance of a contract in the manner which otherwise would have been the most obvious, this will not of itself avoid the contract if it can still be substantially performed without breaking the law(&). But if both parties in fact contemplate an unlawful manner of performance, the case falls within the rule " that a contract lawful in itself is illegal if it be entered into with the object that the law should be violated " (&). A contemplated unlawful or immoral use of property (including money) to be obtained under a contract is an unlawful object within the meaning of this rule, and this whether such use is part of the bargain or not, and whether the party supplying the property is to be paid out of the profits of its unlawful use or not. If both parties know of the wrongful or immoral intention, the agreement is void; if the party who is to furnish the property does not know of it, the contract is voidable at his option when he discovers the other party's intent. This is so well settled by several English decisions that it suffices to refer to the more recent ones (c). An agreement may be rendered unlawful by its connection with a past as well as with a future unlawful transaction. Thus the giving of security (a) (1822)5 B.& Aid. 355, 24 R.K.401. 626 ; Cowan v. Milbourn (1867) L. R. 2 (b*) Waugh v. Morris (1873) L.' R. 8 Ex. 230. But a transfer of property once Q. B. 202 ; see especially at pp. 207, 208. executed in possession cannot be set aside (c) Pearce v. Brooks (1866) L. R. 1 Ex. on this ground : Ayerst v. Jenkins (1873) 213 ; Smith v. White (1866) L. 11, 1 Eq. L, R. 1C Eq. 275. 82 116 THE INDIAN CONTRACT ACT. S. 23.. for money purporting to be payable under an agreement whose purpose was unlawful is itself an unlawful object, even though it was not stipulated for by the original agreement (d). With regard to the tendency of an agreement to " defeat the pro- visions of any law," these words must be taken as limited to defeating the intention which the Legislature has expressed, or which is necessarily implied from the express terms of an Act. It is unlawful to contract to do that which it is unlawful to do ; but an agreement will not be void merely because it tends to defeat some purpose ascribed to the Legislature by conjecture, or even appearing, as matter of history, from extraneous evidence, such as legislative debates or preliminary memoranda not forming part of the enactment. It is not defeating the provisions of a law to take A advantage of the lack of any provision for some particular case. If the / enactment as it stands is intelligible, the Court cannot assume that the I omission was not intended. An agreement entered into with a fraudulent object is a particular species of the genus of agreements contemplating or involving injury to the person or property of another. The general term " injury " means criminal or wrongful harm. Evidently there is nothing unlawful in agreeing to carry on a business lawful in itself, though the property of rivals in that business may, in a wide sense, be injured by the consequent and intended competition. There is no department of the law in which the Courts have exercised larger powers of restraining individual freedom on grounds of general utility, and it is impossible to provide in terms for this discretion without laying down that all objects are unlawful which the Court regards as immoral or opposed to public policy. The epithet " immoral " points, in legal usage, to conduct or purposes which the State, though disapproving them, is unable, or not advised, to visit with direct punishment. " Public policy " points to political, economical, or social grounds of objection, out- side the common topics of morality, either to an act being done or to a I promise to do it being enforced. Agreements or other acts may be con- trary to the policy of the law without being morally disgraceful or exposed to any obvious moral censure. English authorities on the subject of agreements being held un- enforceable as running counter to positive legal prohibitions, to morality, or to public policy, are extremely voluminous and various. Many of them are inapplicable to the circumstances of British India ; not that the elementary (d) Fisher v. Bridges (1854) 3 E. & B. has been extra-judicially criticised, but 342, 97 B. R.701, Ex. Ch. ; Geare.v. Mare seems quite sound. (1863) 2 H. & C. 339. This doctrine ACTS FORBIDDEN BY LAW. 117 rules of law or morality differ in substance in England and in India, but because under the conditions of Indian manners and society such facts as are dealt with by certain classes of English decisions do not occur. References to some of the English cases on matters of general interest will be found in the judgments of Indian Courts digested below. Some topics, on the other hand, are still of practical importance in India, though they are obsolete or all but obsolete in England. "We proceed to discuss the several heads of the section with reference to the Indian authorities. " Forbidden by law." An act or undertaking is equally forbidden by law whether it violates a prohibitory enactment of the Legislature or a principle of unwritten law. But in British India, where the criminal law is codified, acts forbidden by law would seem practically to consist of acts punishable under the Penal Code and of acts prohibited by special legisla- tion, or by regulations or orders made under authority derived from the Legislature, whether the special enactment or regulation be for the pro- tection of the public revenue, the prevention of disease, the security of traffic and maintenance of general order, or for any other purposes incidental to civil administration. Parties are not, as a rule, so foolish as to commit themselves to agreements to do anything obviously illegal, or at any rate to bring them into Court ; so the kind of question which arises in practice under this head is whether an act, or some part of a series of acts, agreed upon between parties, does or does not contravene some legislative enactment or regulation made by lawful authority. The decision of such a question may turn on the construction of the agreement itself, or of the terms of the Act or other authoritative document in question, or on both. In particular it may have to be considered whether the intention of the legislator was to prevent certain things from being done, or only to lay down terms and conditions on which they might be done. It is easy to say that properly drawn Acts or Regulations ought to leave no doubt on that point, but experience has shown that such doubts are possible and have not been uncommon. Broadly speaking, that which has been for- bidden in the public interest cannot be made lawful by paying the penalty for it ; but an act which is in itself harmless does not become unlawful merely because some collateral requirement imposed for reasons of mere administrative convenience has been omitted. There was a time when the English Courts almost regarded it as meritorious to evade statutory regula- tions, and encouraged evasions of them by fine distinctions ; but such has longed ceased to be the judicial policy at home, and in India it would be extremely unwise to rely on old decisions of that kind, even when they have not been overruled or judicially censured. It is possible for a statute to attach a penalty to making a particular kind of agreement, and at the same time to provide that such an agreement, S. 23. 118 THE INDIAN CONTRACT ACT. S. 23. if made, shall not be, therefore, void. We do not know of more than one such case in England (e), or of any in British India. Cases under this head have arisen principally in connection with Excise Acts, and they have all been decided with reference to principles of English law. Those principles may be stated thus : "When conditions are prescribed by statute for the conduct of any particular business or pro- fession, and such conditions are not observed, agreements made in the course of such business or profession are void if it appears by the context that the object of the Legislature in imposing the condition was the maintenance of public order or safety or the protection of the persons dealing with those on whom the condition is imposed ; but they are valid if no specific penalty is attached to the specific transaction, and if it appears that the condition was imposed for merely administrative purposes, e.g., the convenient collec- tion of the revenue (/). Following these principles, it has been held that an agreement by a lessee of tolls from Government under the Bombay Tolls Act, 1875, to sublet the tolls (t/), or an agreement by a lessee of a ferry under the Madras Ferries Act, 1890, to subrent the ferry (h), is valid and binding between the parties, though the sublease may have been given without the permission of the Collector, as required by the terms of the lease. These Acts, which are intended solely for the protection of revenue, must be distinguished from Abkari and Opium Acts, which have for their object the protection of the public as well as the revenue. Thus an agree- ment to sublet a licence to sell arrack issued under the Madras Abkari Act, 1886 ('), or a licence to manufacture and sell country liquor granted under the N.-W. P. Excise Act, 1887 (&), or a licence to sell opium issued under the Opium Act, 1878 (/), is illegal and void, the sublease in each case being prohibited on pain of a fine, and no suit will lie to recover any money due under such an agreement. The result is the same where the holder of such a licence does not actually sublet or transfer the licence, but does an act which amounts to a sublease or a transfer, as where he sells his business in an excisable article in consideration of a money payment with leave to the purchaser to carry on the business in his name, and obtains an indemnity from the purchaser against all loss, claims, and demands in respect of the business. In such a case he cannot recover from the purchaser either the consideration money or payments made by him (e) See Pollock on Contract, 298. (i) Thlthi Pakitrudasu v. Sheemvdu (/) 2b. p. 296. (1902) 26 Mad. 430. (0) Shikanbhai v. Hiralal (1900) 24 (It) Dell Prasad v. Ruj) Ham (1888) Bom. 622. 10 All. 577. (A) Abdulla v. Mammod (1902) 20 (I) Raghunath v. Natliu Ilirji (1894 Mad. 156. 19 Bom. C26. STATUTORY PROHIBITIONS. 119 for debts contracted by the purchaser in the business and covered by S. 23. the indemnity (m). Similarly, a partnership agreement entered into in violation of the terms of a licence granted under the Bombay Abkari Act, 1877, which prohibited the licensee from admitting any partner in the business on pain of a fine, is void as forbidden by law (ri) ; and if a person, being aware of this prohibition, does join as a partner, and advances capital for that purpose, he cannot recover back the amount advanced (0). And where a rule framed under the Madras Abkari Act, 1886, prohibited the holder of a licence for the sale of toddy from being interested in the sale of arrack and the holder of a licence for the sale of arrack from being interested in the sale of toddy, it was held that an agreement of partnership in the business of selling arrack and toddy entered into between a holder of a licence for the sale of toddy and the holder of a licence for the sale of arrack was void, and that neither party could sue the other for the recovery of money due to him in respect of the partnership (p~). Upon the same principles it has been held that an agreement for the sale of fermented liquor by a person who had not obtained a licence as required by the Bengal Excise Act, 1878, is illegal and void, and that no suit will lie at the instance of such a person to recover the price of liquor sold by him (q). Agreements to assign or sublet licences granted under the excise laws must be distinguished from agreements to sublet a contract with a public department. Thus in a Bombay case (r] the defendant contracted with the Executive Engineer of the Public Works Department to supply materials for the construction of a public road. One of the conditions of the contract was that no work was to be underlet by the contractor without the express permission in writing of the Executive Engineer or his duly authorised agent. Subsequently the defendant, without obtaining the requisite permission, entered into an agreement with the plaintiff under which the plaintiff was to do the contract work, and the defendant to pay him all the moneys that might be received by him from the Executive Engineer under the contract after deducting 10 per cent, as the defendant's (m) Behari Loll v. Jagodish Chundei- Bishesliar Das v. Goi'ind Rain (190G) (1904) 31 Cal. 798. Punj. Rec. no. 114. (n) ITormasfi v. Pestanji (1887) 12 (o) Gopalrav v. Kallappa (1901) 3 Bom. 422. In a recent Punjab case it Bom. L. R. 164. was held that a partnership agreement by (p) Marudamuthu v. Rangasami (1900) a licensee under the Excise Act XII of 24 Mad. 401. 1896, which applies in Northern India, (#) Boistub Churn v. Woo ma Chitnl Burma, and Coorg, was not void under (1889) 16 Cal. 436. this section, as it did not contravene any (r) Gangu&har v. Davwdur (1896) 21 of the rules framed under that Act : Bom. 522. !0 THE INDIAN CONTRACT ACT. S. 23. profit. It did not appear that the plaintiff knew of the condition against underletting contained in the contract. The plaintiff sued the defendant for the balance of money due to him under the agreement. It was held that, as the plaintiff did not appear to have any knowledge of the restrictive condition in the contract, he was entitled to enforce his own contract against the defendant. The Court did not consider it necessary to decide whether the sub-contract was void as opposed to public policy, at the same time intimating its opinion that the sub-contract was to be distinguished from the subletting of a licence granted under the excise laws and intended by the Legislature for the use of the licensee only. It was further held that, even if the plaintiff could not enforce his contract, he was at all events entitled under the circumstances to receive from the defendant compensation for the work and labour of which the defendant had received the benefit. "Defeat the provisions of any law." The term "law" in this expression would seem to include any enactment or rule of law for the time being in force in British India. This branch of the subject may thus be considered under three heads according as the object or consideration of an agreement is such as would defeat (1) the provisions of any legislative enactment, or (2) the rules of Hindu law, or (3) other rules of law for the time being in force in British India. 1. Legislative Enactments. Where a lessee of a village from a zamindar agreed to collect from the ryots and pay over to the zamindar an annual festival cess up to that time recovered by the zamindar, it was held that the zamindar could not recover from the lessee the amount of the cess collected by him, the cess being of a nature prohibited by the Bengal Rent Recovery Act X of 1859, s. 10 (s). And where the manager of a temple at Broach sued the defendant to establish the right of the temple to levy a cess on cotton purchased in Broach and exported from it, it was held that, assuming that the defendant impliedly assented to pay the cess, the agree- ment was unlawful as being against the provisions of the Bombay Town Duties Act XIX of 1844, which abolished cesses of every kind not forming part of the land revenue (t). Similarly where A. was required under the Code of Criminal Procedure (u~) to furnish a surety for his good behaviour, and B. agreed to become a surety on condition that A. would deposit with him the sum in which he was required to go bail, and the deposit was made, it was held, in a suit brought after the expiry of the period of suretyship, that A. was not entitled to recover the deposit from B., as the effect of the 00 Kumala Kant Ghose v. Kalu raj v. Robb (1884) 8 Bom. 398. MalwmeA (18G9) 3 B. L. R. A. C. 44. () Then Act X of 1872, s. 50:>, now (t) Goxcami S/tr'i Purusltotamji JItiJta- Act V of 1898 s. 107. OBJECT FORBIDDEN BY LAW. 121 agreement was to defeat the provisions of the Code by rendering B. a surety S. 23. only in name (x). Likewise, a surety who has given a bail for an accused person cannot recover from the accused the bail which has been forfeited in consequence of the accused failing to appear when required by the Court which released him on bail (y). And it is conceived that a suit will not lie to recover the amount of a loan by a British subject to a native prince in India without the consent of the Government, such loans being prohibited by the East India Company's Act, 1797 (37 Geo. III. c. 142, s. 28). But where an agreement is merely " void " as distinguished from "illegal," e.g., an agreement to give time to a judgment debtor without the sanction of the Court (z), either party may, on performing his part of the contract, enforce the contract as against the other (a). The provisions of the Insolvent Debtors Act afford further illustrations of the class of agreements now under consideration. Thus an agreement by which an insolvent who has obtained his personal, but not his final, discharge settles the claim of one creditor without notice to the official assignee or his other creditors, and by which that creditor agrees not to oppose his final discharge, is void as in fraud of the creditors and as incon- sistent with the policy of that Act(#). Similarly a promissory note whereby a creditor secures for himself a larger payment from an insolvent than what he is entitled to under a composition deed is void where the other creditors are not aware of the arrangement. The same principle applies even though the note may have been passed to the creditor by a third party if it is done with the insolvent's knowledge (c). And it has been recently held by the High Court of Bombay that a composition deed whereby a debtor assigned the whole of his property to trustees for the benefit of such of his creditors as should sign the deed within a certain period is void as against the official assignee (W). On like grounds a collusive assignment of a contract by a party thereto on the eve of his insolvency to his brother-in-law with the object of defrauding his creditors is void under this section and s. (2), cl. (h), of the Transfer of Property Act, 1882 (e), as the effect of such an assignment (#) Fateh Singh v. Sanwal Singh (1878) (V) Naoroji v. Kazl Si-dick Mlrza 1 All. 751. (1896) 20 Bom. G36. (y) Sunder Singh v. Kixlu'n Ckand (c) Krishnappa Chetti v. Adimitla (1899) Punj. Rec. no. 1. Mudall (1896) 20 Mad. 8-t ; Mahamad v. (z) Such an agreement was declared to Parameswara (1906) 16 Mad. L. J. 418. be void under the Code of Civil Procedure, ((T) Manmohandas v. N. C. Macleod 1882, s. 257A. That section has now been (1902) 26 Bom. 765. omitted in the Code of Civil Procedure, (e) Clause (/t) of s. 6 of the Transfer of 1908. Property Act provides that no transfer () Bank of Bengal v. Vyubhoy (1891) can be made for an unlawful object or 16 Bom. 618. See also Abttjl v. Trimlalt consideration within the meaning of s. 23 (1903) 28 Bom. 06, 73. of the Contract Act. 122 THE INDIAN CONTRACT ACT. S. 23. is to defeat the provisions of the Insolvency Act by preventing the benefit of the contract from vesting in the official assignee (/). A mortgage of immovable property belonging to a minor by a person holding a certificate of administration in respect of the estate of the minor under the Bengal Act XL of 1858 (g) is void where it is made without the sanction of the Court, even though the mortgage money was advanced to liquidate ancestral debts and to save an ancestral property from sale in the execution of a decree (h). Where a specific kind of land or specific rights in land have been declared by the Legislature to be not transferable, a transfer of such land or rights in land is void, as to permit it would be to defeat the provisions of the law within the meaning of the section (i). Thus a sale by occupancy tenants of occupancy rights is void, it being of such a nature that if permitted it would defeat the provisions of the N.-W. P. Rent Act (7c). Similarly an agreement to transfer the rights of an ex-pro- prietary tenant in a mahal is illegal, as it would defeat the provisions of the N.-W. P. Rent Act XII of 1881, s. 7 (m). But there is nothing in the provisions of the latter Act to render an assignment by a lambardar of the profits of a mahal unlawful under this section (n). A usufructuary mortgage of an occupancy holding by an occupancy tenant is void under this section, for, if permitted, it would defeat the provisions of the Agra Tenancy Act II of 1901, s. 21 (0). And where a specific individual has been declared under an Act to be incompetent to transfer land belonging to him, a transfer of his land by that person is void under this section, and such a transfer cannot be enforced even after removal of the disability (p). But a stipulation for payment of compound interest, though not allowed by the Regulations in force in the Santhal Parganas (q), is not unlawful within the meaning of the present section (r). Nor is an alienation made pending (/) Jaffer Meher All v. Budge Budge (/) Kashi Prasad v. Kedar Nath Sahu Jute Mills Co. (1907) 34 Cal. 289, in appeal (1897) 20 All. 219. from (1906) 33 Cal. 702. () Chadma Lai v. KisJien Lai (1894) (#) Repealed by the Guardian and All. W. N. 17 ; BJiagwan Das v. Bliajju Wards Act VIII of 1890, of which see Mai (1894) AH. W. N. 140. ss. 29 and 30. (<>) Earn Samp v. Khlian Lai (1907) (It) Chlmman Singh v. Subran Kuar All. W. N. 76. (1880) 2 All. 902. (p) Radha Bai v. Eamod Singh (1908) (0 Phalli v. Matabadal (1883) All. 30 All. 38 (a case under Jhansi Incum- W. N. 7 (a case under N.-W. P. Rent Act bered Estates Act XVI of 1882, s. 8, XII of 1881, s. 9, relating to occupancy relating to disqualified zamindars). rights) ; Indar v. Khushll (1886) All. (q) Regulation III. of 1872, s. 6, and W. N. 88 (a case under N.-W. P. Revenue Regulation V. of 1893, s. 24. Act XIX of 1873, s. 125, relating to sir (r) Shama Charan v. Chuni Lai (1898) land). 26 Cal. 238. (&) Jhhigvri v. Durga (1885) 7 All. 878. OBJECT FORBIDDEN BY LAW. 123 a temporary injunction under s. 492 of the Civil Procedure Code [now 0. 39, S. 23. r. 1] unlawful under this section (s). A loan by a military officer to a man under his command is not unlawful as being against the law, though such a loan may be against the rules of discipline (t). A compromise of a suit whereby the defendant agrees to a mortgage decree being passed against him even in respect of a claim not secured by a mortgage is not unlawful or opposed to public policy (u). There is nothing in the Bengal Drainage Acts (x) to render invalid a contract between a landlord and his tenant by which the latter agrees to pay the former drainage cost in respect of land on which rent has for the first time been imposed, in consequence of a scheme of works carried out under the Acts benefiting it (y). 2. Rules of Hindu and Mahomedan. law. An agreement that would defeat the provisions of Hindu law would be unlawful within the meaning of the present clause. A contract to give a son in adoption in considera- tion of an annual allowance to the natural parents is an instance of this class, and a suit will not lie to recover any allowance on such a contract, though the adoption may have been performed. The Hindu law does not recognise in this kali yug any adoption but that of a dattak son, and such a son is defined in the Dattaka Chandrika (s. 1, par. 12) as a son " affectionately given by his father or mother." Besides defeating the provisions of the Hindu law, such an agreement would involve an injury to the person and property of the adopted son, " inasmuch as, if it could be proved that the boy was purchased and not given, it is very probable that the adoption would be set aside, and if such adoption were set aside he would not only lose his status in the family of his adopting father, but also lose his right of inheritance to his natural parents " (z). And it has been held by the High Court of Bengal (a) that a contract entered into by Hindus living in Assam, by which it is agreed that, in the event of the husband leaving the village in which the wife and her friends resided, the marriage was to become null and void, is " contrary to the policy of the law " (ft), and to the " policy and spirit of the Hindu law " (c). Again, it is a rule of Hindu law that for the fulfilment of the duties which the law imposes upon a wife she must reside with her husband wherever he may choose to reside. An (*) Manohar Das v. Earn Antar (1903) (y] Jyoti Kumar v. Sari Das (1905) 25 All. 431. 32 Gal. 1019. (0 Ana Singh v. Sadda Singh (1873) (?) Ethan Kishor v. Haris Chandra Punj. Rec. no. 16. (1874) 13 B. L. R. App. 42. (u) BhumnagiriSultlarayndu v.Mara- (a) Sitaran v. Mussamut Ahferce dugula Venltataratnam (1907) 17 Mad. Heeralinee (1873) 11 B. L. R. 129. L. J. 200. (b) Ib., per Couch, C. J., at p. 134. (x) Act VI of 1880 and Act II of (c) Ib., per Kemp, J., at p. 135. 1902. 124 THE INDIAN CONTRACT ACT. S. 23. agreement, therefore, by a Hindu husband that he will not be at liberty to remove his wife from her parents' abode to his own abode is illegal, as, if permitted, it would defeat the rule of Hindu law on the subject. Such an agreement is, besides, opposed to public policy. An agreement of this kind is no defence to a suit by the husband for the restitution of conjugal rights against his wife, and for a decree directing her to live with him at his house (d). An agreement entered into before marriage between a Mahomedan wife and husband by which it is provided that the wife should be at liberty to live with her parents after marriage is also void, and does not afford an answer to a suit for restitution of conjugal rights (e). Similarly, an agreement entered into after marriage between a Mahomedan wife and husband who were for some time prior to the agreement living sepa- rate from each other, providing that they should resume cohabitation, but that if the wife should be unable to agree with the husband she should be free to leave him, is void, and does not constitute a defence to the husband's suit for restitution of conjugal rights (/). But an agreement between a Mahomedan wife and husband entered into before marriage by which it is provided that the wife should be at liberty to divorce herself from her husband under certain specified conditions is valid, if the conditions are of a reasonable nature and are not opposed to the policy of the Mahomedan law. Whec such an agreement is made, the wife may, on the happening of the con- tingencies, repudiate herself in the exercise of the power, and a divorce will then take effect as if the taldq had been pronounced by the husband. This is known in Mahomedan law as taldq (divorce by the husband) by tafwtz (delegation), the wife being, as it were, delegated by the husband to pro- nounce the taldq (g). But an ante-nuptial agreement between a Hindu husband and wife enabling the wife to avoid the marriage if the husband married an additional wife, or did not treat her kindly, or asked her to live at place D. instead of place B., is void, such an arrangement being repugnant to the spirit of the Hindu law (fi). A karnavan of a tarwad cannot part by contract, so as to be unable to resume them, with the privileges and duties which attach to his position as Tcamavan(i). Such an agreement is invalid on the principle that " there can be no renunciation of rights and consequent destruction of relative duties prescribed by an absolute law " (k). (d) Tekalt Mon Mohlni Jemadai v. (g~) Hamidoolla v. Fuizunmsm (1882) Easanta Kumar Singh (1901) 28 Gal. 8 Gal. 327. 751 ; Lahoran Sheikh Nabbi v. Jtladar (/<) Chait Ram v. Mit.t.^i in unit Ntitlii Baksh (1878) Punj. Eec. no. 20. (1900) Punj. Rec. no. 15. (e) Abdul v. Hmseribi (1904) 6 Bom. (/) Cherukomen v. Istmala (1871) 6 L. E. 728. M. H. C. 145. (/) Meherallyv. Sakerkhanoobai (1905) (//,) Ib., per Holloway, J. at p. 150. 7 Bom. L. R. 602. OTHER RULES OF LAW IN FORCE IN BRITISH INDIA. 125 3. Other rules of law in force in British India. It is now a settled s. 23. principle of law that where a decree is silent as to subsequent interest on the amount decreed, interest cannot be recovered by proceedings in execution of the decree (/). But an agreement in the nature of a compromise between a decree -holder and a judgment-debtor, which proceeds upon ignorance common to both parties thereto as to the above principle, is not illegal as defeating the provisions of that law (m). Again, it is a well-established rule of law that, unless a will is proved in some form, no grant of probate can be made merely on the consent of parties. Hence an agreement or compromise as regards the genuineness and due execution of a will, if its effect is to exclude evidence in proof of the will, is not lawful so as to be enforceable under the provisions of s. 375 of the Civil Procedure Code [now 0. 23, r. 3] (n). Similarly, a receiver being an officer of the Court, the Court alone is to determine his remuneration, and the parties cannot by any act of theirs add to, or derogate from, the functions of the Court without its authority (0). A promise, therefore, to pay the salary of a receiver without leave from the Court, even if unconditional, being in con- travention of the law, is not binding on the promisor (j?). But an agreement providing for remuneration to be paid to an executor not out of the assets of the testator, but from the pocket of a third person, is neither forbidden by the Administrator-General's Act, 1874, s. 56, nor is it one which if permitted would defeat the provisions of that Act, nor is it against public policy () Pullen Chetty v. Ramalinga Chetty 3 Cal. 602. (1870) 5 M. H. C. 368, referring to (n) Monmohlnl Gu/ia v. Banga Chandra Sanliarappa v. Kamayya (1866) 3 M. H. Das (1903) 31 Cal. 357. C. 231, and Gnanabliai v. Srinlmsa 00 See Civil Procedure Code, s. 503. Plllai (1868) 4 M. H. C. 84. See also (p) Prohash Chandra v. Adlam (1903) liajan Harjl v. Ardeshir Horniusji (1879) 30 Cal. 696. 4 Bom. 70. 126 THE INDIAN CONTRACT ACT. S. 23. " nothing in this section contained shall impair the rights of any transferee in good faith and for consideration." Such a transfer is not illegal, for the section merely declares that it shall be voidable at the option of the party affected by the transfer. Where the object of an agreement between A. and B. was to obtain a contract from the Commissariat Depart- ment for the benefit of both, which could not be obtained for both of them without practising fraud on the Department, it was held that the object of the agreement was fraudulent, and that the agreement was therefore void(s). But an agreement between A. and B. to purchase property at an auction sale jointly, and not to bid against each other, is perfectly lawful (/). " Injury to the person or property of another." The consideration or object of an agreement is unlawful when it involves or implies injury to the person or property of another. A mortgage- bond, whereby a person who is entitled to a moiety only of certain property mortgages the whole of that property, is not void under this section as to the moiety belonging to him, merely because he purports to mortgage the other moiety also not belonging to him (u). For an instance of agree- ment void under this head, see the adoption case cited in the notes to this section under the head " Rules of Hindu and Mahomedan Law," p. 123, above. " Immoral." A landlord cannot recover the rent of lodgings knowingly let to a prostitute who carries^on her vocation there (a;). Otherwise, if the lajTgJQj-d did notjkjipjyjbat the lodgings were required for prostitution (y). Similarly, money lent to a prostitute expressly to enable her to carry on her . trade cannot be recovered (z). On like grounds, ornaments lent by a brothel- II keeper to a prostitute for attracting men and encouraging prostitution 1 1 cannot be recovered back (a). An assignment of a mortgage to a woman for future cohabitation is void, and it can be set aside at the instance of the assignor, though partial effect may have been given to the illegal (x) Sahib Ham v. Nagar Mai (1884) no. 22. Punj. Rec. no. 63. (z) Bholl Baltsh v. Gtdia (1876) Punj. (f) Nanda Singh v. Sunder Singh Rec. no. 64. (1901) Punj. Rec. no. 37. Quls negarit ? (a) Alia Baltsh v. Churiia, (1877) Punj. () Joffo Mohen Deb v. Davdoong Rec. no. 26. A similar English case is Bin-man (1908) 12 C. W. N. 94. Pearce v. JBnwks (1866) L. R. 1 Ex. 213 (;f) GaurinathMooTierjee\.Madhumani (goods sold to a prostitute known by the PeshaJtar (1872) 9 B. L. R. App. 37 ; seller to be such, and to want the goods Pirthi Mai v. Mussammat Bhagan (1898) " for the purpose of enabling her to make Purij. Rec. no. 2 ; Brinltman v. Abdul a display favourable to her immoral Ghafur (1904) Punj. Rec. no. 65. purposes"). (y) Sultan v. Nanu (1877) Punj. Rec. IMMORAL OBJECT. 127 consideration (b). And it has been held that money paid by a wife to a S. 23. third person to be given as a bribe to a gaoler for procuring the release of her husband from gaol could not be recovered back on failure of such person to procure the release (c). Similarly, where the plaintiff advanced moneys to the defendant, a married woman, to enable her to obtain a divorce from her husband, and the defendant agreed to marry him as soon as she could obtain a divorce, it was held that the plaintiff was not entitled to recover back the amount, as the agreement had for its object the divorce of the defendant from her husband, and the promise of marriage given under such circumstances was contra bonos mores (d). An agreement to pay money upon the consideration that the plaintiff would give evidence in a civil suit on behalf of the defendant cannot be enforced. Such an agree- ment may be for giving true evidence, and then there is no consideration, for " the performance of a legal duty is no consideration for a promise " ; or it may be for giving favourable evidence either true or false, and then the consideration is vicious (e). There is nothing in this decision, or in the reasons for it, to invalidate an expert's claim for services rendered in the way of professional investigation, though he may afterwards become a witness for his employer in a litigation arising out of the same facts. Under the Common Law of England, and presumably under any monogamous law of marriage in a jurisdiction where promises of marriage are actionable, an agreement between a married man and a woman who knows him to be married to marry one another after the wife's death is void as being contrary to morality and public policy (/). We shall next turn to cases of agreements not held to be immoral. A loan made for the purpose of teaching singing to naikins (dancing girls) has nothing immoral in its object, for although it might be true that most of the naikins who sing lead a loose life, singing is a distinct mode of obtaining a livelihood, not necessarily connected with prostitution (g). And (5) Thasi Muthukannu v. Shunmu- (/) Wilson v. Carnley [1908] 1 K. B. gavelu (1905) 28 Mad. 413. See also 729, C. A., confirming Spiers v. Hunt, ib. Alice Mary Hill v. William Clark (1905) 720. It seems to be still good law that a 27 All. 266, and Mussammat Roshun v. promise of marriage made by a person Muhammad (1887) Punj. Eec. no. 46. who is married and conceals the fact from All these cases are quite plain on the the promisee is actionable at the suit of principles of English law. the innocent promisee on the ground of (6-) Protima Aurat v. Dukhia SlrTtar the promisor's implied warranty that he (1872) 9 B. L. K. App. 38. can lawfully make and perform the (d) Bai Vijli v. Nansa Nagar (1885) promise : Millward v. Littlewood (1850) 10 Bom. 152 ; Mussammat Roshun v. 5 Ex. 775, 82 E. R. 871. This, however, Muhammad (1887) Punj. Rec. no. 46. may be of little importance in India. (e) Sashamiah Chetti v. Ramasamy (#) Khubchand v. Seram (1888) 13 Chetty (1868) 4 M. H. C. 7. Bom. 150. 128 THE INDIAN CONTRACT ACT. S. 23. it has been held by the High Court of Allahabad that a suit will lie for arrears of allowance agreed to be paid to a woman for past cohabitation (k}. The Court observed : " Such a consideration, if consideration it can properly be called, which seems to us more than doubtful, would not be immoral so as to render the contract de facto void, but we think the more correct view is to regard the promise to pay the allowance as an undertaking on the part of Bikramajit Singh to compensate the woman for past services voluntarily rendered to him for which no consideration as defined in the Contract Act would be necessary." It would seem that the High Court thought the case was covered by s. 25 (2) of the Act, though the section is not specially referred to. But it is submitted that a consideration which is immoral at the time, and, therefore, would not support an immediate promise to pay for it, does not become innocent by being past. The English view of such cases is that the alleged consideration is bad simply as being a past consideration not within any of the exceptional rules (so far as such exceptions really exist) allowing past consideration, under certain conditions, to be good. In a recent case the same High Court held that, adultery in India being an offence against the criminal law, cohabita- tion past or future, if adulterous, is not merely an immoral but an illegal consideration ('). In an old Madras case (k), the tenants of certain villages engaged the services of the defendant to advocate their cause with regard to assessments made upon the villages, and agreed to pay to him a sum of money subscribed amongst themselves if he succeeded in obtaining a more favourable assessment. A portion of the subscription amount was paid to him in advance, and it was agreed that if he failed in his work he should repay the amount. In a suit to recover the amount paid to the defendant on the ground that he had failed to perform his part of the contract, it was held that the plaintiffs were entitled to succeed, and that the agreement was not vitiated by illegality. The Court observed : " The point, then, for consideration is, Did the defendant for that purpose undertake, in con- sideration of the stipulated sum, to induce by corrupt or illegal means, or by the exercise of personal influence, any public servant to do an official act or show any favour ? If he did not, the contract cannot be treated as illegal ; and we are of opinion that the written agreement does not properly admit of such a construction." Here the principle was applied (p. 115, (h) Dhiraj Kuar v. Bikramajit Singh decide whether the view taken in those (1881) 3 All. 787. See also Man Kuar v. cases was correct, he did not express any Jasodha Kuar (1877) 1 All. 478. Both dissent from it. these cases were referred to in Lakshnri- (/') Alice Mary Hill v. William Clark narayana v. Siibhadrl Animal (1903) 13 (1905) 27 All. 266. Mad. L. J., where Bhashyam Aiyangar, J., (A) Pichaltutty Mudall v. Naraya said that though it was not necessary to HUVJM (1864) 2 M. H. C. 243. AGREEMENTS AGAINST PUBLIC POLICY. 129 above) that, where it is possible to perform an agreement by lawful means S. 23. according to its terms, an unlawful intention will not be presumed, and any party alleging such an intention must prove it. " Opposed to public policy." The general head of public policy covers, in English law, a wide range of topics. Agreements may offend against public policy by tending to the prejudice of the State in time of war (trading with enemies, etc.), by tending to the perversion or abuse of municipal justice (stifling prosecutions, champerty and maintenance), or, in private life, by attempting to impose inconvenient and unreasonable restrictions on the free choice of individuals in marriage, or their liberty to exercise any lawful trade or calling. Some of these matters are separately dealt with in the Contract Act (see ss. 26 and 27, below). It is now under- stood that the doctrine of public policy will not be extended beyond the classes of cases already covered by it. No Court can invent a new head of public policy (?) ; it has even been said in the House of Lords that " public policy is always an unsafe and treacherous ground for legal decision " (m). This does- not affect the application of the doctrine of public policy to new cases within its recognised bounds (n). 1. Trading with enemy. Agreements alleged to amount to trading with an enemy, or otherwise to operate in the enemy's favour, in time of war, do not appear to have come before the Courts of British India. Here it may suffice to say that all trade with public enemies without licence of the Crown is unlawful. " The King's subjects cannot trade with an alien enemy, i.e., a person owing allegiance to a Government at war with the King, without the King's licence " (0). This includes shipping a cargo from an enemy's port even in a neutral vessel (p). As a consequence of this, " no action can be maintained against an insurer of an enemy's goods or ships against capture by the British Government " (q). If the performance of a contract made in time of peace is rendered unlawful by the outbreak of war, the obligation of the contract is suspended or dissolved according as the intention of the parties can or cannot be substantially carried out by postponing the performance till the end of hostilities (r). In such a case (7) Lord Halsbury, Janson v. Dricfon- fontein Consolidated Mines [1902] A. C. tein Consolidated Mines [1902] A. C. 484, at p. 499. 491. O) Potts v. Bell (1800) 8 T. R. 548, 5 O) Lord Davey [1902] A. C.at p. 500 ; R. R. 452 ; Esposito v. Bmoden (1857) 7 Lord Lindley at p. 507, in very similar E. & B. 763. words, cited in Govind v. Pacheco (1902) (j) Lord Macnaghten, Janson v. Drie- 4 Bom. L. R. 948. fontein Consolidated Mines [1902] A. C. () See Wilson v. Carnley, p. 127, at p. 499. above. () Esposito v. Bowden (1857) 7 E. & () Lord Macnaghten, Janson v. Drie- B. 763. i.e. 9 130 THE INDIAN CONTRACT ACT. S. 23. a contracting party is not bound to perform a part of his undertaking which remains possible and lawful in itself, but would be useless without the rest (s). The rules under this head become applicable only when an actual state of war exists. They cannot be made to relate back to a time before the war, though war may have been apprehended. A contract of insurance made before war cannot be vitiated, as regards a loss by seizure also before any act of public hostility, by the fact that war did break out shortly afterwards (t). 2. Stifling prosecution. Agreements for stifling prosecutions are a well-known class of those which the Courts refuse to enforce on this ground. The principle is " that you shall not make a trade of a felony" (u). In England the compromise of any public offence is illegal. If the accused person is " innocent, the law [is] abused for the purpose of extortion ; if guilty, the law [is] eluded by a corrupt compromise screening the criminal for a bribe " (x). It is not necessary to prove that there was any express threat of prosecution if the transaction in fact amounted to a bargain not to prosecute, and if the Court thinks the defence of illegality a disreputable one to raise in the circumstances, the only way in which it can give effect to its opinion is in dealing with the costs (y). But the English common law rule, that contracts for the compounding or suppression of criminal charges for offences of a public nature are illegal and void, has no applica- tion to a contract for compounding the prosecution of criminal proceedings for an offence against the municipal law of a foreign country and committed there, if such a contract is permitted by the law of that country, and this whether the contract is entered into there or in British territory. A suit will, therefore, lie in British India on a bond passed to the plaintiff in consideration of his withdrawing a prosecution for theft instituted in the French Court at Pondicherry, the agreement being permissible by the French law (z). It would be difficult, indeed, to hold that the compromise () Geipel v. Smith (1872) L. R. 7 (1867) 4 M. H. C. 14. Reference was Q. B. 404. made in the course of the judgment to (f) Janson v. Drlefontein Consolidated the rule of private international law that Mines [1902] A. C. 484. "the law of the place of a contract" (u) Lord Westbury, Williams v. Bayley governs its validity. That expression, (1866) L. R. 1 H. L. 200, 220. however, is ambiguous. The local law (x) Keir v. Leeman (1844) 6 Q. B. 308, governing the substance of a contract 9 Q. B. 371, 392 ; Windhill Local Board may, according to the circumstances, be v. Vint (1890) 45 Ch. Div. 357. that of the place where it was made, or of (y) Jones v. Merionethshire Building that where it is to be performed; and Society [1892] 1 Ch. 178, C. A. these are only auxiliary tests for ascer- (z) Subraya Pillai v. Sulraya Mudali taining the intention of the parties as to STIFLING PROSECUTION. 131 of a French lawsuit in a manner allowed by French law could be injurious to the administration of justice in British India. A compromise of proceedings which are criminal only in form, and involve only private rights, may be lawful (a). This perhaps is of no importance in Indian practice, where we have a statutory list of com- poundable offences (b). " The criminal law of this country makes a differ- ence between various classes of offences. With regard to some, it allows the parties to come to an agreement and either not to take proceedings or to drop the proceedings after institution in a few instances even without the leave of the Court, and, in other instances, with the leave of the Court. But there are other instances which cannot be compounded or arranged between the parties. If the offence [is] compoundable and [can] be settled in or out of Court without the leave of ~the Court, there seems no reason why [a compromise] should be regarded as forbidden by law or as; against public policy, the policy of the criminal procedure being to allow' such a compromise in such cases " (c). Thus where A. agreed to execute a kabala of certain lands in favour of B. in consideration of B. abstaining from taking criminal proceedings against A. with respect to an offence of simple assault which is compoundable, it was held that the contract was not against public policy and that the same could be enforced (d). So a promise to pay a sum of money as compensation for the abduction of a woman is enforceable, provided the abduction does not constitute a non- compoundable offence (e). Likewise, money paid to compromise a charge of adultery may be recovered back, if the party to whom the money is paid proceeds with the prosecution of the charge, adultery being a compoundable offence (/). But where the plaintiffs agreed to relinquish their right to a religious office in favour of the defendant in consideration of the latter withdrawing a charge of criminal trespass preferred against them, it was stated by Innes, J., that the agreement was illegal, as it " would amount to the stifling of a criminal prosecution for an offence which the law does not permit to be compounded." The case was, however, treated as one of S. 23. what law is to prevail : Hamlyn fy Co. v. Talisker Distillery [1894] A. C. 202; Dicey, Conflict of Laws, 529, 565, 2nd ed. Kaufman v. Gerson [1904J 1 K. B. 591, C. A., looks at first sight contra; but the Court seems to have been influenced by peculiar facts, and it is far from clear that the decision was intended to lay down any general rule of law. And see p. 10, above. () Fisher 4' Co. v. Apollinaris Co. (1875) L. K. 10 Ch. 297, as qualified by Windhill Local Board v. Vint (1890) 45 Ch. Div. 351. ( b) See s. 345, Criminal Procedure Code, 1898 ; see also Penal Code, ss. 213, 214. (a) Per Cur. Amir Khan v. Amir Jan, (1898) 3 C. W. N. 5. (d) Ibid. (e) Shah Rahman v. Ismail Khan (1904) Punj. Eec. no. 82. (/) Hosein Shah v. Nur Ahmed (1875) Punj. Rec. no. 81. 92 132 THE INDIAN CONTRACT ACT. S. 23. " coercion," the charge of trespass being false, and the sole cause for enter- ing into the agreement being " the well-founded terror of the influence of the prosecutor and of the civil death which would probably result from his proceedings " (g). In Kessowji v. Hurjivan (h) it was held that a guarantee for the payment to creditors of debts due to them in consideration of the creditors abstaining from taking criminal proceedings against the debtor is void, as being against public policy. But it must be noted, as observed in that case, that " a man to whom a civil debt is due may take securities for that debt from his debtor, even though the debt arises out of a criminal offence, and he threatens to prosecute for that offence, provided he does not, in consideration of such security, agree not to prosecute, and such an agreement will not be inferred from the creditor's using strong language. He must not, however, by stifling a prosecution, obtain a guarantee for his debt from third parties." Following this principle, it has been held that where a bond fide debt exists and where the transactions between the parties involve a civil liability as well as possibly a criminal act, a promissory note given by the debtor and a third party as security for the debt is not void under this section ('). As a suit will not lie on an agreement to stifle a prosecution, so an agreement of this class will not avail as a defence to a suit. Thus, where in a suit for damages for wrongful arrest and confine- ment the defendant pleaded an agreement under which the plaintiff was to give up all claims against the defendant for his arrest and confinement in consideration of the defendant withdrawing charges of criminal trespass and being a member of an unlawful assembly preferred against the plaintiff, it was held that, the latter offence being non-compoundable, the agreement could not be set up as an answer to the suit (&). But the mere fact that A. makes an agreement with B., who intends, by means of something to be obtained or done under it, to effect an unlawful or immoral purpose, will not render the agreement illegal unless A. knows of that purpose. Thus, if B. sells his house to A. for the purpose of raising money to be given to certain third persons as a bribe to induce them to withdraw a charge of criminal breach of trust which they had preferred against B., the sale is not illegal unless it be proved that A. was aware of the unlawful object (/). 3. "Champerty and Maintenance." The practices forbidden under these names by English law (partly by old statutes which it is needless to (g) Pudishary Krishnenv. Karampally (1906) Punj. Rec. no. 9. Knnlntnni (1874) 7 M. H. C. 378. (It) Dalsukhram v. Charles de Brett on (//) (1887) 11 Bom. 566. See also (1904) 28 Bom. 326. Gobardhan Dan v. Jai Klshen Das (1900) (I) Rajltrixto Moitro v. Koylash Cltunder 22 All. 224, 230. (1881) 8 Cal. 24, citing Pollock on Con- (0 Jai Kumar v. Gauri Nath (1906) tract, p. 342, 2nd ed. (397, 7th eel.). 28 All. 718 ; Nanak Chand v. Durant CHAMPERTY AND MAINTENANCE. 133 specify here, and which are said to be only in affirmance of the common S. 23. law) may be summarily described as the promotion of litigation in which one has no interest of one's own. Maintenance is the more general term ; champerty, which in fact is the subject of almost all the modern cases, is in its essence " a bargain whereby the one party is to assist the other in recovering property, and is to share in the proceeds of the action " (m). Agreements of this kind are equally illegal a.nd void whether the assist- ance () to be furnished consist of money, or, it seems, of professional assistance, or both (0). They are in practice often found to be also dis- putable on the ground of fraud or undue influence as between the parties (p ). There is no rule of law to forbid the purchase of property of which the title is or may be disputed, but the law does not, therefore, sanction mere speculative traffic in rights of action (-). To which class a given transaction belongs, in a case where doubt is at first sight possible, seems to be a question of fact rather than of law. The specific rules of English law against maintenance and champerty u have not been adopted in British India (f) ; neither are substantially ' similar rules applicable in any other way (s) ; but the principle, so far as it rests on general grounds of policy, is regarded as part of the law of " justice, equity, and good conscience " to which the decisions of the Court should conform. The leading judgment to this effect is in Fischer v. Kamala Naiclcer (), an appeal from the Sudder Dewanny Adawlut, Madras. There the Judicial Committee observed : " The Court seem very properly to have considered that the champerty, or, more properly, the maintenance, into which they were inquiring, was something which must have the qualities attributed to champerty or maintenance by the English law ; it () Hutley v. Hutley (1873) L. R. 8 damages are or were freely assignable ; Q. B. 112, per Blackburn, J., and see per see L. Q. R. ix. 97. Cbitty, J., Guy v. Churchill (1888) 40 (?) Ckedambara Chetty v. Renja Ch. D. at p. 488. Krishna (1874) L. R. 1 Ind. Ap. 241, 13 B. () There must be something more than L. R. 509; Ram Coomar Coondoo v. simply communicating information : Rees Chunder Canto Mookerjee (1876) L. R. 4 v. De Bernardy [1896] 2 Ch. 437, 446. Ind. Ap. 23, 2 Cal. 233. (0) Stanley v. Jones (1831) 7 Bing. 369, (*) Bhagwat Dayal Singh v. Debt 33 R. R. 513, may be considered the Dayal Sahu (1907) 35 Cal. 420, L. R. 35 leading modern case ; Re Attorneys and Ind. Ap. 48, 56. Solicitors Act (1875) 1 Ch. D. 573. (t) (1860) 8 M. I. A. 170, where it was (p) E.g. Rees v. De Bernardy [1895] stated that an assignment by an agent to 2 Ch. 437. his principal of his interest in an agree- (if) See the Transfer of Property Act, ment entered into in his name, but on 1882, s. 6 (e). By the customs of the behalf of the principal, was not cham- Kachins, a tribe on the north-east fron- pertous. tier of Burma, claims for unliquidated 134 THK INDIAN CONTRACT ACT. S. 23. must be something against good policy and justice, something tending to promote unnecessary litigation, something that in a legal sense is immoral, and to the constitution of which a bad motive in the same sense is necessary " (u). Adverting to these observations in a later case (#), the same Committee said : " It is unnecessary now to say whether the above considerations are essential ingredients to constitute the statutable offence of champerty in England ; but they have been properly regarded in India as an authoritative guide to direct the judgment of the Court in determining the binding nature of such agreements there." In Bhagtvat Dayal Singh v. Debi Dayal Sahu (y), which is the latest Privy Council decision on the subject, their Lordships clearly laid it down that an agreement champertous according to English law was not necessarily void in India ; it must be against public policy to render it void here. A present transfer of property for consideration by a person who claims it as against another in possession thereof, but who has not yet established his title thereto, is not for that reason opposed to public policy (z). Nor is it opposed to public policy merely because the payment of the major part of the consideration is made to depend on the transferee's success in the suit to be brought by i him to recover the property (a). Similarly agreements to share the I subject of litigation if recovered in consideration of supplying funds to * carry it on are not in themselves opposed to public policy (>). " A fair agreement to supply funds to carry on a suit in consideration of having a share of the property if recovered ought not to be regarded as being per se opposed to public policy. Indeed, cases may be easily supposed in which it would be in furtherance of right and justice and necessary to resist oppression that a suitor who had a just title to property and no means except the property itself should be assisted in this manner. But agree- ments of this kind ought to be carefully watched, and when found to be extortionate and unconscionable so as to be inequitable against the party, or to be made, not with the bond fide object of assisting a claim believed to be just and of obtaining a reasonable recompense therefor, but for improper objects, as for the purpose of gambling in litigation or of injuring or oppressing others by abetting and encouraging unrighteous suits so as to be contrary to public policy, effect ought not to be given to 00 8 M. I. A. p. 187. (x) Ram Coomar Coondoo v. Ckunder Canto Mookerjee (1876) 2 Cal. 233, L. R. 4 Ind. Ap. 23. (y) (1908) 35 Cal. 420, L. R. 35 Ind. Ap. 48. (z] Achal Ram v.JCazhii Husaut. Khun (1905) 27 All. 271, L. R. 32 Ind. Ap. 113, as explained in Bhagwat Dayal Singh v. Debi Dayal Sahu, supra. (a) Bhagivat Dayal Singh v. Debi Dayal Sahu, suj>ra. (b~) Kumoar Ram Lai v. j\il KantJu (1893) L. R. 20 Ind. Ap. 112. CHAMPERTY AND MAINTENANCE. 135 them " (c). But though the Courts will not give effect to agreements "got S. &3. up for the purpose merely of spoil or of litigation," they may in a proper case award compensation for legitimate expenses incurred by the lender to enable the borrower to carry on the lawsuit (rf). Thus where, in con- sideration of the plaintiff agreeing to defray the expenses of prosecuting the defendant's suit to recover a certain property, the defendant agreed to transfer to the plaintiff, in one case nine annas share of the property (0), in another two annas share (/), and in a third eight annas share (g], it was held that the agreement was extortionate and inequitable, and the plaintiff was awarded the expens38 legitimately incurred by him with interest. But mere inadequacy of consideration is not of itself sufficient to render a transaction champertous (h). An agreement for the purchase of a property pendente lite which entitled the purchaser to cancel the agree- ment in the event of the suit being decided against the vendor so as to leave the vendor no interest in the property is not champertous (*'). Similarly an assignment for a second time by the mortgagor of his equity of redemption previously assigned to another by an unregistered document is not champertous, though the transaction may be one not commendable in conscience (&). A sale for Rs. 50 of property worth Rs. 150 which the vendor had previously transferred by way of gift to another person is not champertous (I). And where a patnidar, having a claim against the defendant for Rs. 13,099, sold fourteen annas share of his claim to another for Rs. 4,000, it was held in a suit by the patnidar and his assignee to recover Rs. 13,099 from the defendant that the sale was not (c) Ram Coomar Coondoo v. Chunder Singh (1893) L. R. 20 Ind. Ap. 127, 15 All. Canto Moolterjee (1876) L. K. 4 Ind. Ap. 23, 352, in appeal from Chunni Kuar v. Rup 2 Cal. 233. The point actually decided was Singh (1888) 11 All. 57. that a suit cannot lie at the instance of (g) Husain JSakhsh v. Rahmat Husain a successful defendant in a former suit (1888) 11 All. 128. See also Harival- to recover the costs of that suit from a abhdas v. Bhai Jivanji (1902) 26 Bom. party who advanced funds for the prosecu- 689. tion of the suit to the plaintiff therein, (h) Gurusami v. Subbaraya (1888) 12 even though the advances may have been Mad. 118 ; Siva Ramayya v. Ellamma made under an agreement champertous (1899) 22 Mad. 310. and unconscionable in its nature, and (i) Ahmedbhoy Hubibhoy v. Vulleebhoy though that party was the real actor and Cassumbhoy (1884) 8 Bom. 323, 333, 334. had an interest in that suit. (k) Gopal Ramehandra v. Gangaram (ff) Kunwar Ram Lai v. Nil Kanth (1889) 14 Bom. 72, followed by the High (1893) L. R. 20 Ind. Ap. 112 ; Dhallu v. Court of Madras in the case of a similar Jiwan Singh (1894) Punj. Rec. no. 79 ; transaction in Ramanuja v. Narayana Stewart v. Ram Chand (1906) Punj. Rec. (1895) 18 Mad. 374. no. 26. (1} Sira Ramayya v. Ellamma (1899) (e) Ibid. 22 Mad. 310. (/) Raja Mohltam Singh v. Raja Rup 136 THE INDIAN CONTRACT ACT. S. 23. champertous (in). But where the liquidator of a company compromised a claim of the company amounting to Rs. 161,500 for a tenth part of its amount on the representation of the debtor's friends that he could not pay more, and after about ten years assigned the same claim to a third person who was neither a creditor nor shareholder of the company, but a complete outsider as regards all matters connected with the company, it was held in a suit brought by the assignee to have the compromise declared void on the ground of fraud that the suit was not maintainable, as the assignment was effected with a view to litigation, and was, therefore, champertous in its nature (n). Sargent, J., said : " The case is, therefore, the simple one of a stranger officiously interfering for reasons of his own, and in no way at the request or even suggestion of the company or liquidator, in a matter in which he has no connection whatever, with the sole object of enabling himself to dispute transactions which occurred ten years ago, and in which, independently of the assignment of those claims, he has no interest whatever, so far at least as appears on the plaint." In a recent Privy Council case, A. claimed to be entitled to a taluq by succession, of which B. had entered into possession. Not having money to establish his title to the taluq by suit, A. sold a moiety of the taluq to R. for Rs. 150,000. In the sale deed it was stated that a lac of rupees had been paid down by R. and that the balance of Rs. 50,000 was to remain on deposit with R. to be expended in prosecuting the proposed suit and in paying Rs. 50 every month to A. and Rs. 20 to his mukhtar. A suit was then brought by A. and R. as co-plaintiffs against B. A. afterwards compromised with B., and withdrew from the suit. Then arose the question whether R. could sue alone, and it was held that he could. It was contended on behalf of B. that the statement in the sale deed that one lac had been paid to A. was not true, and that the sale to R. was void as being champertous. Their Lordships, after observing that the statement as to the payment of one lac was not in accordance with the fact, said : " Of course, at the first blush, the untrue statement throws suspicion upon the whole transaction. But after all, so long as the deed stands, it is no concern of [B.] that [A.] may have a grievance against [R.] on the score of a misstatement in an instrument to which [B.] is no party. [A.] himself has taken no steps to impeach the deed. On the contrary, in the course of the two years that elapsed between the date of the deed and the institution of the suit, [A.] more than once affirmed the transaction. . . . Apart from the untrue recital in the sale deed there seems to be no flaw in the transaction. (HI) Abdool Hakim v. Dourga Proshad (n) Goculdas v. Lalthmidas (1879) 3 (1879) 5 Cal. 4. See also Taracliand v. Bom. 402. (1888) 12 Bom. 559. CHAMPERTY AND MAINTENANCE. 137 Without assistance [A.] could not have prosecuted his claim. There was S. 23. nothing extortionate or unreasonable in the terms of the bargain. There was no gambling in litigation. There was nothing contrary to public policy. Their Lordships agree with the judgment of the Court of the Judicial Commissioner that the transaction was a present transfer by [A.] of one moiety of his interest in the estate, giving a good title to [R.] on which it was competent for him to sue " (alracv.Xallappa(l9()l')3Roin. (g) Joseph v. Solatia (1872) 9 B. L. R. L. R. 164. ENTIRE OR DIVISIBLE AGREEMENTS. 147 house and also a rent-note whereby B. agrees thenceforward to occupy the S. 24. house as A.'s tenant and to pay rent to him. A. cannot sue B. on the reiit- note. " The sale deed and the rent-note are part and parcel of the same transaction," and " the rent-note is tainted with the same illegality which affects the sale deed " (M). Different consequences, however, may follow when a part of the consideration or "object" of an agreement is not illegal, but merely void in the sense that it is not enforceable in law. In such a case actual performance of such part may be a good consideration, though a promise to perform it would not have been. Thus a bond passed by a judgment debtor to the holder of a decree against him in consideration of the latter refraining from execution of the decree is void under s. 257A of the Civil Procedure Code, 1882, but not illegal. The decree-holder, there- fore, on performing his part of the agreement, was held entitled to recover on the executed consideration (/), being in itself a voluntary lawful forbear- ance, though not upon the executory agreement. If the promise to postpone execution of the decree were illegal the whole bond would be tainted with illegality, and the judgment creditor would then have no right to enforce pay- ment of the bond. But when the parties themselves treat debts void as well as valid as a lump sum, the Court will regard the contract as an integral one, and wholly void. Thus where a judgment debtor agreed to pay in a lump sum interest not awarded by a decree in addition to the sum decreed without the sanction of the Court it was held that, the promise to pay such interest being void under s. 257A of the Civil Procedure Code, 1882, the whole agreement was void(m). Section 257A has been omitted in the Code of 1908. The provisions of this section must be distinguished from those of s. 57, below. In a Bengal case a Mahomedan husband agreed by a registered document that he would pay over to his wife whatever money he might earn, and that he would do nothing without her permission, and that if he did so she would be at liberty to divorce him. In a suit by the wife to recover from him his earnings it was held that, though the latter part of the agreement might be unlawful, the suit was one to enforce the legal part, and the Court gave a decree to the plaintiff for her maintenance at Rs. 12 per month, stating that the fair construction of the agreement was not that the husband was to pay every rupee he earned, but that he was entitled to a reasonable deduction for expenses which he must necessarily incur (). Indian Trusts Act, 1882. S. 4 of that Act provides that where a trust is created for two purposes of which one is lawful, and the other unlawful, and the two purposes cannot be separated, the whole trust is void. (M) Laxmanlal v. Mulshankar (1908) (TH) Davlatsing v. Pandu (1884) 9 Bom. 10 Bom. L. R. 553. 176. (T) Sank of Bengal v. Vyablioy Gangji (n) Poonoo Bibee v. Fyez Ituksh (1874) (1891) 16 Bom. 618. 15 B. L. R. App. 5. 102 L8 THE INDIAN CONTRACT ACT. S. 25. 25. An agreement made without consideration is void, unless Agreement with- . ... . out consideration, (1) it is expressed in writing and regis- writing and regi- tered under the law for the time being in force for the registration of [documents (o)], and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless (2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done or is a promise to . compensate for something for the promisor, or something something done, 1-1,1 i n n 11 which the promisor was legally compellable to do ; or unless (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his or is a promise to . . . pay a debt barred agent generally or specially authorised in that by limitation law. , - . behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. Explanation 1. Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made. Explanation 2. An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate ; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given. Illustrations. (a) A. promises, for no consideration, to give to B. Es. 1,000. This is a void agreement. (b) A., for natural love and affection, promises to give his son, B., (0) The word " documents " has been by the Repealing and Amending Act XII substituted for the word "assurances" of 1891. CONSIDERATION. 149 Rs. 1,000. A. puts his promise to B. into writing, and registers it. S. 25. This is a contract. (c) A. finds B.'s purse and gives it to him. B. promises to give A. Es. 50. This is a contract. (d) A., supports B.'s infant son. B. promises to pay A.'s expenses in so doing. This is a contract. (e) A. owes B. Es. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B. Es. 500 on account of the debt. This is a contract. (f) A. agrees to sell a horse worth Es. 1,000 for Es. 10. A.'s con- sent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. (g) A. agrees to sell a horse worth Es. 1,000 for Es. 10. A. denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A.'s consent was freely given. Consideration. This section declares, long after consideration has been defined (s. 2, sub-s. (d) ), that (subject to strictly limited exceptions) (p) it is a necessary element of a binding contract. This has already been assumed in s. 10. The present section goes on to state the exceptional cases in which consideration may be dispensed with. It is curious that the Act nowhere explicitly states that mutual promises are sufficient consideration for one another, though it is assumed throughout the Act, and seems to be involved in the definitions of " agreement " and " reciprocal promises " in s. 2, sub-ss. (e) and (f) (see the commentary thereon, pp. 23, 24, 26, above) (q). The most obvious example of an agreement without consideration is a purely gratuitous promise given and accepted. Such a promise has no legal force unless it comes within the first class mentioned in the present section. But there are other less obvious cases ; and they must be all the more carefully noted because neither the text nor the illustrations of this section throw any light on them. It is not enough that something, whether act or promise, appears, on the face of the transaction, to be given in exchange for the promise. That which is given need not be of any (p) The rule of the common law But these matters are of no practical cannot be properly stated in this way ; importance in India, for the formal contracts of English law, (?) This section, it has recently been which are binding by their form alone, observed, is exhaustive : Indran Jtama- are older than the doctrine of considera- swami v. Anthappa Chettlar (1906) 16 tion. Ingenious attempts have been M. L. J. 422, at p. 426. This means, we made to treat consideration itself as a presume, that an agreement made without matter of form. This is paradoxical, for consideration is either enforceable under the essence of consideration is exchange this section or not enforceable at all, of value regardless of any particular form. which hardly seems to need authority. THE INDIAN CONTRACT ACT. S. 25. particular value ; it need not be in appearance or in fact of approximately equal value with the promise for which it is exchanged (see on explanation 2, below) ; but it must be something which the law can regard as having some value, so that the giving of it effects a real though it may be a very small change in the promisee's position ; and this is what English writers mean when they speak of consideration as good, sufficient, or valuable. An apparent consideration which has no legal value is no consideration at all. A performance or promise of this kind is sometimes called an " unreal " consideration. Forbearance and Compromise as Consideration. Compromise is a very common transaction, and so is agreement to forbear prosecuting a claim, or actual forbearance at the other party's request, for a definite or for a reasonable time. It may seem at first sight that in all these cases the validity of the promise is doubtful. For the giving up, or forbearing to exercise, an actually existing and enforceable right is certainly a good con- sideration (r) ; but what if the claim is not well founded ? Can a cause of action to which there is a complete defence be of any value in the eye of the law ? If a man bargains for reward in consideration of his aban- donment of such a cause of action, does he not really get something for nothing, even if he believes he has a good case ? The answer is that abstaining or promising to abstain from doing anything which one would otherwise be lawfully free to do or not to do is a good consideration, and every man who honestly thinks he has a claim deserving to be examined (s) is free to bring it before the proper Court, and have the judgment of the Court on its merits, without which judgment it cannot be certainly known whether the claim is well founded or not ; for the maxim that every man is presumed to know the law, not a very safe one at best, is clearly inapplicable here. That which is abandoned or suspended in a compromise is not the ultimate right or claim of the party, but bis right of having the assistance of the Court to determine and, if admitted or held good, to enforce it. " If an intending litigant bond fide forbears a right to litigate a question of law or fact which it is not vexatious or frivolous to litigate, he does give up something of value. It is a mistake to suppose it is not an advantage, which a suitor is capable of appreciating, to be able to litigate his claim, (r) Jagadindra Nath v. Chandra Nath asked, " Is your cause just ? " may quite (1903) 31 Cal. 242. fairly answer: "I see nothing against 0) He need not have a positive opinion good conscience in it ; whether it is good that it is justified ; for its success may in law is exactly what I want the Court depend on facts not within his own to tell me." These refinements, however, knowledge, or on unsettled questions of are perhaps fitter for the moralist than law, or both. Oftentimes a man who is for the lawyer. FORBEARANCE TO SUE. 151 even if he turns out to be wrong " ((). Forbearance to sue for or demand a S. 25. merely honorary or customary debt may be a good consideration (u). The principle thus stated is followed by the Indian Courts. Thus where after the expiration of the time fixed for completion of a mortgage the mortgagee declined to advance the money unless the mortgagor con- sented to pay interest from the date fixed for the completion, and the mortgagor agreed to do so, it was held that there was a good consideration for the agreement, though time was probably not of the essence of the original contract. The mortgagee believed in good faith that he was entitled to rescind at once, and the abandonment of his claim to do so was consideration enough for the mortgagor's agreement to his terms (x). An agreement in the nature of a compromise of a lona fide dispute as to the right of succession to a priestly office is not without consideration (y) nor is a mutual agreement to avoid further litigation invalid on this ground (z). But a pledge or promise of security for an existing debt is void unless there is some forbearance or undertaking by the creditor (such as not pressing for payment, or accepting a reduced rate of interest) in return for it. Thus where the drawer of a hundi became insolvent before it fell due, and the plain- tiff, who was the holder in due course applied to the acceptor to give security for payment at maturity, and the latter executed a mortgage " by way of collateral security bond," it was held that, the plaintiff not having entered into any undertaking whatever, he could not recover on the mortgage deed (a). Promise to perform existing duty. It is well settled in England that the performance of what one is already bound to do, either by general law or by a specific obligation to the other party, is not a good consideration for a promise ; for such performance is no legal burden to the promisee, but, on the contrary, relieves him of a duty. Neither is the promise of such performance a consideration, since it adds nothing to the obligation already existing. Moreover, in the case of the duty being imposed by the general law, an agreement to take private reward for doing it would be against (f) Bowen, L. J., in Miles v. New notice that he would rescind if the Zealand Alford Estate Co. (1886) 32 Ch. defendant did not complete within a Div. 266, 291. Cp. Willy v. Elgee (1875) reasonable time ; see at p. 465. L. R. 10 C. P. 497. (y) Girijanund v. Sailajanund (1896) () Goodson v. Orierson [1908] 1 23 Cal. 645, 665, 666 ; Itameshwar Prosad K. B. 761 C. A. Even a gaming debt v. Lachmi Prosad (1904) 31 Cal. Ill, which for some purposes would itself be 131 132 ; Bhiwa Mahadshet v.Shivaram an " illegal consideration " under the Mahadshet (1899) 1 Bom. L. R. 495, 497. English Gaming Acts : Hyams v. Stuart (z) Bliima v. Ningappa (1868) 5 King [1908] 2 K. B. 696, C. A. B. H. C., A. C. J. 75. (ar) Dadabhoy v. Pestonji (1893) 17 (a) Manna Lai v. Bank of Bengal Bom. 457. The plaintiff's right was (1876) 1 All. 309. really, it seems, to give the defendant 1 2 THE INDIAN CONTRACT ACT. S. 25. public policy. But before applying this rule we must be careful to ascer- tain that a legal duty does exist. A promise to remunerate a person named as executor (not out of the estate itself) if he accepted the office and per- formed the duties of executor is not bad for want of consideration, since it is not a legal duty to accept the office (b) and perform those duties without claiming any remuneration. But a person served with a subpoena is legally bound to attend and give evidence in a court of law, and a promise to com- pensate him for loss of time or other inconvenience is void for want of consideration (e). Similarly an agreement by a client to pay to his vakil after the latter had accepted the vakdlatnama a certain sum in addition to his fee if the suit was successful is without consideration (d). And it has been held by the High Court of Allahabad that a bond passed by a judgment debtor to the holder of a decree against him for the amount of the decree plus Us. 3 paid for him for the stamp and registration charges of the bond is without consideration where the decree was made by a Court having no jurisdiction to make it, and the bond was passed to secure the release of the debtor from arrest (e). But if a man, being already under a legal duty to do something, under- takes to do something more than is contained therein, or to perform the duty in some one of several admissible ways in other words, to forego the choice which the law allows him this is a good consideration for a promise of special reward (/). If A. is already bound to do a certain thing, not by the general law, but under a contract with Z., it seems plain that neither the performance of it nor a fresh promise thereof without any addition or variation will support a promise by Z., who is already entitled to claim performance. For Z. is none the better thereby in point of law, nor A. any worse. But what if M., a third person not at present entitled to claim anything, offers a promise to A. in consideration of (a) A.'s performance of his obligation to Z., or (b) A.'s promise to M. to perform that obligation ? These questions have given rise to great difference of learned opinion in England and America (#). They do not seem to have been considered by Indian Courts. (*) Narayan v. Shajani (1894) 22 Cal. (e) Banda All v. Banspat Sing/i(l882) 14. It was also argued, without success, 4 All. 352. that the agreement was against public (/) England v. Davidson (1840) 11 A. policy as making it the executor's interest & E. 856, 52 R. K. 522 (reward to con- to prolong the administration of the estate stable for services beyond duty) ; Hartley against his duty. v. Pomonby (1857) 7 E. & B. 872. (c) Sasluinnah Chttti v. Ramasamy GO See Pollock on Contract, 7th ed. Chettl (1868) 4 M. H. C. 7. 186190, and the references given at (cT) Ramchandra Chintaman v. Kalu p. 189 ; Anson, llth ed. 106 ; L. Q. R. xx. Raju (1877) 2 Bom. 362. Cf. Ganga Ram 9 (January, 1904) ; Harv. Law Rev. xvii. v. Den Das (1907) Punj. Rec. no. 61. 71 ; Leake, 5th ed. 436, 437. PROMISE TO PERFORM EXISTING DUTY. 153 Such English authority as there is favours the opinion that the performance S. 25. is a good consideration ; but the reasons given are not very clear, and seem to assume that both performance and promise must be good considerations in such a case, or neither (A). It is submitted, however, that on principle this assumption is not tenable. The test is whether there is any legal detriment to A., the supposed promisee. Now A.'s performance of what he already owes to Z. is no detriment to him, as has been pointed out ; and indeed the resulting discharge of his liability seems rather to be an advan- tage ; and therefore it is no consideration for a new promise by any one. But A.'s promise to M. to do something, though he may have already promised Z. to do that same thing, is the undertaking of a new obligation to a new party. There is no reason why it should not be made binding by M.'s counter-promise, as in any other case of a contract by reciprocal promises, unless the law forbids the same performance to operate in discharge of two distinct contracts. There is no positive authority for any such rule of law, and when we bear in mind that in a contract by reciprocal promises the promises are the consideration for each other, and not the performance, no such rule appears to be demanded or warranted by principle. Whatever resolution of the speculative question may ultimately prevail, the difficulty may be removed, in the case of performance, by the slightest appreciable addition to the performance already contracted for, and, in the case of promise, by A.'s new undertaking to M. being or including an undertaking not to rescind or vary, without M.'s consent, his existing contract with Z. Transfer of immovable property. This section has been held to apply to cases of sale and mortgage of immovable property. Thus in Manna Lai v. Bank of Bengal (i) the Allahabad High Court held a mort- gage effected by a duly registered deed to be void for want of consideration under this section. Similarly in Tatia v. Babaji (&) Fulton, J., held that a sale effected by a duly registered deed under which the purchaser had entered into possession was void for want of consideration under this section. Farran, C.J., however, was inclined to the opinion that convey- ances of land in the Mufassal perfected by possession or registration, where the consideration expressed in the conveyance to have been paid had not in fact been paid, could not be put in the same category as agreements (/() Sha&well v.Shadivell (1860) 9 C. B. consideration was supposed to beperform- N. S. 159, but qucere whether there was in ance or promise. The present writer is fact any intention to create a legal obliga- free to confess that the conclusions now tion at all (see the dissenting judgment submitted have been arrived at only after of Byles, J.) ; Scotson v. Pegg (1861) 6 long hesitation. H. & N. 295, Finch, Sel. Ca. 333, where it (i) (1876) 1 All. 309. is rather difficult to make out whether the (/<) (1896) 22 Bom. 176, 181, 182. 154 THE INDIAN CONTRACT ACT. S. 25. void for want of consideration (/). The first of these two cases was decided before the Transfer of Property Act IV of 1882 was enacted. As regards the other case, that Act was not yet extended to the Bombay Presidency when the deed of sale was executed. It would seem, however, that the result would be the same under s. 54 of that Act read with s. 4. The latter section declares that the chapters and sections relating to con- tracts in that Act shall be taken as part of the Contract Act. Negotiable Instruments. The law merchant has almost but, as it is held by something very near a fiction, not quite made an exception to the rule of consideration in the case of negotiable instruments, or rather established another and independent rule. The Negotiable Instruments Act XXVI of 1881, s. 118, affirming the well-settled general law, enacts that until the contraiy is proved the presumption shall be made that every negotiable instrument was made or drawn for consideration ; and that every such instrument, when it has been accepted, endorsed, negotiated, or transferred, was accepted, endorsed, negotiated, or transferred for con- sideration. The second branch of the above rule stands as illustration (c) to s. 114 of the Evidence Act I of 1872. We now come to the exceptional cases in which consideration is dispensed with. Registered writing. The English doctrine that the " solemnity of a deed " is of itself sufficient to make a promise expressed in a sealed writing valid has never been received in British India (m). The Act does not allow any form alone to dispense with consideration, but only writing and regis- tration coupled with the motive of natural love and affection between nearly related parties. The words " near relation " have not been judicially construed. The Courts would, it need hardly be said, have to construe them uniformly without regard to variations in the reckoning of degrees of kindred, for the purposes of inheritance or the like, in different personal laws or customs (ri). A registered agreement between a Mahomedan husband (I) 22 Born, at p. 183. but this is not material for Indian pur- (/) Kaliprasad Tewarl v. Raja Sahib poses. Prahlad Sen (1869) 2 B. L. R. (P. C.) at (n) Jafar All v. Ahmed All (1868) 5 p. 122. In England the formal operation B. H. C., A. C. J. 37, where it was held, of a deed is much older than the doctrine before the Act, that the relation of of consideration. It is therefore erroneous cousins would not support a voluntary to say, as text-books commonly did at one agreement, though registered, throws no time, that the formality " imports a con- light on the possible construction of the sideration." On the contrary, the doctrine Act ; for by the Common Law, which the of consideration was introduced only Court apparently followed, no degree of when informal contracts were made kinship, however near, would suffice, actionable by a series of ingenious fictions ; REGISTERED WRITING. 155 and his wife to pay his earnings to her is within the provisions of cl. 1 of the S. 25. section (0). So is a registered agreement whereby A. on account of mutual love and affection for his brother, B., undertakes to discharge a debt due by B. to C. In such a case, if A. does not discharge the debt, B. may discharge it, and sue A. to recover the amount (p). But an agreement in writing and registered, whereby a member of an undivided Hindu family, without any valuable consideration, renounces all right to the family property in favour of the remaining coparceners, is void unless it is executed for natural love and affection (q). It is not to be supposed that the nearness of relationship necessarily imports natural love and affection. Thus where a Hindu husband executed a registered document in favour of his wife, whereby, after referring to quarrels and disagreement between the parties, the husband agreed to pay her for a separate residence and maintenance, and there was no consideration moving from the wife (r), it was held in a suit by the wife brought on the agreement that the agreement was void as being made without consideration. It was further held that the agreement could not be said to have been made on account of natural love and affec- tion, the recitals in the agreement being opposed to that view (*). It is difficult to reconcile with the last case the decision of the Bombay High Court in Bhiiva Mahadshet v. Shivaram Mahadshet (f). In that case A. sued his brother B. upon a registered instrument whereby B. had agreed to give A. one-half of certain property. It appeared that A. had previously sued B. to recover that share from him, alleging that the property was ancestral, but the suit was dismissed on B. taking a special oath that the property was not ancestral. It further appeared on the plaintiff's own admissions that the brothers had long been on bad terms. Upon these facts the Subordinate Judge held that the agreement was void for want of consideration, and that it could not be said to have been made on account of natural love and affection so as to come within the first exception to the section, and the decision was affirmed by the District Judge. On appeal (0) Poonoo Bibee v. Fyez BultsJi (1874) obtaining a separate residence and main- 15 B. L. R. App. 5. tenance, such as violence on the part of (p) Venltatasamy v. Rangasamy (1903) the husband which would render it unsafe 13 Mad. L. J. 428. for the wife to continue to live with him, (#) Appa Plllui v. Ranga Filial (1882) or such continued ill-usage as would be 6 Mad. 71. The facts cf the case did not termed cruelty in the English Court, show that the agreement was made on There would then have been ample con- account of natural love and affection. sideration to support the agreement. (r) It would, of course, have been () RajluMy Dabee v. Bhootnnth (1900) different if the facts had disclosed such a 4 C. W. N. 488. state of circumstances as would, under (f) (1899) 1 Bom. L. E. 495. the Hindu law, have justified the wife in 156 THE INDIAN CONTRACT ACT. S. 25. the High Court held that the agreement must be held to have been made for natural love and affection, and that A. was entitled to a decree. The Court said : ' The District Judge dismissed it (the suit), holding the document void for want of consideration. . . . The Subordinate Judge had held the same. He said ' there was no consideration for the agree- ment. The defendant voluntarily agreed to give half of the plaint property to the plaintiff to secure reconciliation with the plaintiff.' It seems to us, however, that this is just the case to which s. 25 (1) of the Contract Act should be held to apply. The defendant had such natural love and affec- tion for his brother that, in order to be reconciled to him, he was willing to give him this property." As natural love and affection cannot be inferred as a fact merely because no other motive for the promise is shown, it would seem that the Court presumed it from the relation of the parties. One would have thought that the presumption, if any, was rebutted by the plaintiff's own admissions. A desire for a reconciliation prompted (as the learned Judge of the High Court thought) by love and affection for the plaintiff is not strongly evinced by the subsequent conduct of the defendant in declining to perform the contract and driving the plaintiff to a suit. But, however this may be, it appears to us anything but safe to hold that a promise by one brother to another, unsupported by any consideration, and made solely with a view to purchase peace, can be enforced in a Court of law on the bare supposition that the object was reconciliation, and that the reconciliation was prompted by natural love and affection. Compensation for voluntary services. The second sub-section con- siderably extends the real or supposed exceptions (for their authority is by no means clear) allowed in the Common Law to the principle that past consideration is no consideration at all, since the consideration and the promise have to be simultaneous (w). The language of the Act is quite clear, and must be taken as expressing a deliberate policy ; it would there- fore be useless to discuss the English rules. The act voluntarily done must have been done for the promisor (x). If it is done for any other person, the promise does not come within the provisions of this clause. In an Allahabad case the defendants by a written agreement promised to pay to the plaintiff a commission on articles sold by them in a market established by the plaintiff at his expense. The market was not established at the desire of the defendants, nor was it O) As to the English law see Anson, knowledge of the promisor, or otherwise llth ed. 110 sqq. and cp. p. 128, above. than at his request, does the latter some (x) Not at his request. That case is service, and the promisor undertakes to covered by s. 2 (d), p. 11, above. The recompense him for it" : perFarran,C. J., enactment now before us " appears to Sindha v. Abraham (1895) 20 Bom. 755. cover cases where a person without the COMPENSATION FOR VOLUNTARY SERVICES. 157 erected for them, but this was done at the request of the Collector of the S. 25. place. The only ground for making the promise was the expense incurred by the plaintiff in establishing the ganj. The Court held that the promise could not be supported under the present sub-section (y). Further, the act voluntarily done must have been done for a promisor who was in existence at the time when the act was done. Hence work done by a promoter of a company before its formation cannot be said to have been done for the company (z). Again, the act done must have been done for a promisor who is competent to contract at the time when the act was done. Hence a promise by a person on attaining majority to repay money lent and advanced to him during his minority does not come within the exception, the promisor not being competent to contract when the loan was made to him. It has been so held by the High Court of Madras (a). A different view has been taken by the High Court of Calcutta (b), but it does not appear to be sound law. See notes to s. 11 under the head "Minor's Contract," on p. 55, above. A promise to pay a woman an allowance for past cohabitation has been regarded as an undertaking by the promisor to compensate the promisee for past services voluntarily rendered to him (c) ; but the correctness of these decisions may be doubted. It is true that in English law past, cohabitation, though no better in law than any other past consideration, is not an unlawful consideration (d) so as to make a formal instrument void which is in fact given to secure an allowance therefor. But in order to support the Indian decisions just cited it must be held that cohabitation is at the time such a lawful voluntary service as to be a proper subject for compensation, which is quite another matter (e). It is clear that a case cannot come within this exception unless there is a promise in the first instance. A clause in a memorandum or articles of association of a company providing for payment to a promoter of the company does not constitute a promise by the company to the promoter. (y) Durga Prasad v. Saldeo (1880) 3 v. Subhadri Ammal (1903) 13 Mad. L. J. All. 221. 7, 13. (c) Ahmedabad Jubilee S. fy W. Co. v. (d) Gray v. MatMas (1800) 5 E. R. 48, Chhotalal (1908) 10 Bom. L. R. 141, 143. 5 Ves. 286 ; Beaumont v. Reeve (1846) 8 So it is well settled in England that a Q. B. 483. It may perhaps be doubted company cannot ratify acts of its promo- whether the effect given to the present ters done before it was formed. sub-section by applying these authorities (a) Itidran Ramaswami v. Anthappa to it was contemplated by the framers of Chettiar (1906) 16 Mad. L. J. 422. the Act. (&) Musammat Kundaii Bibi v. Sree (e) See on s. 23, p. 128, above. At all Nai'tnjan (1907) 11 C. W. N. 135. events adulterous intercourse will not (c 1 ) Dhiraj Kuar v. Bikramajit Singh support a subsequent promise of compen- (1881) 3 All. 787 ; Man Kuar v. Jasodka, sation under this clause: Alice Mary Kuar (1877) 1 All. 478 ; laUshminarayana Hill v. William Clarke (1905 27 AIL 266. 158 THE INDIAN CONTRACT ACT. S. 25. Hence a claim against a company for remuneration by a promoter of the company cannot be supported under this section, where such claim is based merely on the provisions of the memorandum and articles of association of the company (/). Promise to pay a barred debt. Sub-s. (3) reproduces modern English law. The reason for upholding these promises was thus stated soon after the Act came into force by Westropp, C. J. (g) : " The general rule of law, no doubt, is that a consideration merely moral is not a valuable considera- tion such as would support a promise (ti) ; but there are some instances of promise which it was formerly usual to refer to the now exploded principle of previous moral obligation, and which are still held to be binding, although that principle has been rejected. Amongst those instances is a promise after full age to pay a debt contracted during infancy, and a promise (in writing) in renewal of a debt barred by the Statute of Limita- tions. The efficacy of such promises is now referred to the principle that a person may renounce the benefit of a law made for his own protection." To create a "promise" within the meaning of this enactment it is not necessary that there should be an accepted proposal reduced to writing. All that is necessary is that there should be a written proposal by the promisor accepted before action, for a written proposal becomes a promise when accepted ('). The distinction between an acknowledgment under s. 19 of the Limitation Act and a " promise " within the meaning of this section is of great importance. Both an acknowledgment and a promise are required to be in writing signed by the party or his agent authorised in that behalf ; and both have the effect of creating a fresh starting point of limitation (A). But while an acknowledgment under the Limitation Act is required to be made before the expiration of the period of limitation, a promise under this section to pay a debt may be made after the limitation period. After the period of limitation expires, nothing short of a fresh promise will provide a fresh period of limitation (I). The question occasionally arises whether a writing relating to a barred debt amounts to an acknowledgment (/) AJtmedabad Jubilee S. $' W. Co. v. (&) An acknowledgment in writing is Clthotalal (1908) 10 Bom. L. R. 141 ; Eley not the only mode of creating a fresh v. Posit ire Government Security Life starting point of limitation in the case of Inxura-nce Co. (1876) 1 Ex. D. 88. a debt not barred by limitation. An oral (ff) Tillakckand v. Jitamal (1873) 10 agreement to extend the time of payment B. H. C. 206, 215. may effect the same purpose: S/iri>iicnx (A) Eastwood v. Kenyan, 11 Ad. & E. v. Raglwnath (1902) 4 Bom. L. R. 50. 438 ; Beaumont v. Reeve, 8 Q. B. 483. (/) See Ganga Prasad v. Ram Dayal (0 Appa Rao v. Suryapraltasa Rao (1901) 23 All. 502, at p. 504. (1899) 23 Mad. 94, 97, 98. PROMISE TO PAY BARRED DEBT. 159 or to a promise. If it amounts to an acknowledgment, the writing could S. 25. not avail the plaintiff under this section ; but it is otherwise where it amounts to a promise. Thus khata or an account stated has been held to be a mere acknowledgment as distinguished from a promise under this section (ni). Similarly a bare statement of an account is not a promise within the meaning of this section (n). In the same way the words bald deva (balance due) at the foot of a Gujarati account were held not to amount to a promise (0). On the other hand, where a tenant wrote to his landlord in respect of rent barred by limitation, "I shall send by the end of Veyshak month," it was held that the words constituted a promise under this section (p). In a recent Bombay case, a khata signed by the defendant ran as follows : " Es. 200 were found due on the account of the previous khata having been made up. For the same this khata is passed. The moneys are payable by me. I am to pay the same, whenever you may make a demand." It was held that the khata was a promise to pay within the meaning of this section^). In Watson v. Yates(r) the defendant, after his debt had become barred by limitation, wrote as follows to his creditor in reply to a demand for payment : " I would assure you that I bear the matter in mind, and will do my utmost to repay the money as soon as I possibly can." It was held that this constituted a conditional promise to pay the barred debt, the condition being the ability of the defendant to pay. The plaintiff in the case failed to show that the defendant was able to pay, and it was held that the defendant could not, therefore, be held bound. Agent generally or specially authorised in that behalf. A Collector, as agent to the Court of Wards, is not an agent within the meaning of this section to bind a ward of the Court of Wards by a promise to pay a barred debt (s). Debt. The expression "debt" in this clause includes a judgment (;) C/iowksi Himutlal v. Chowhsl Rec. no. 35, the last two being cases Achrutlal (1883) 8 Bom. 194. under the Indian Stamp Act II of 1899. (M) Ramji v. Dharma (1882) 6 Bom. () Ckandraprasad v. Varajlal (1906) 683. 8 Bom. L. E. 644 ; Malibub Jan v. Nur- (<) Ranchhoddas Nathulhai v. Jey- iid-Dln (1905) Punj. Rec. no. 102. cluuid Khushalchand (1884) 8 Bom. (/) (1887) 11 Bom. 580. See the 405. similar English authorities collected in (p) Appa Rao v. Swryapraktu* Rao Leake on Contracts, 5th ed. 702, or the (1899) 23 Mad. 94. See also Raghoji v. editor's note to Tanner v. Smart (1827) Abdul Karim (1877) 1 Bom. 590 ; CliMur 30 R. R. 461, 6 B. & C. 603. Jagsl v. Julal (1877) 2 Bom. 230 ; Laxu- (s) Suryanarayana v. Narendra That- milui v. Ganesh Ragliunath (1900) 25 raz (1895) 19 Mad. 255. Bom. 373 ; Daula v. Gonda (1903) Punj. 1QO THE INDIAN CONTRACT ACT. S. 25. debt. A promise, therefore, to pay the amount of a decree barred by limitation does not require any consideration to support it (t). An insolvent who has obtained his final discharge is under no legal obligation to pay any debt included therein, and any promise to pay it is accordingly without consideration. Such a debt is said to be barred by insolvency, and the Contract Act contains no exception in favour of a promise to pay it (n). It is not clear, however, whether the same principle would apply to a promise without new consideration to pay a debt in respect of which the insolvent has obtained only his personal, and not his final, discharge, and which is included in the judgment entered up against him in favour of the official assignee. In such a case it will be observed that the creditor's remedy is not, strictly speaking, barred, but is transferred to the official assignee, who alone can recover the debt in the manner and subject to the conditions provided by the Insolvent Debtors Act of 1848. In Naorqfi v. Kazi SidicTc (x) the defendant filed his petition and schedule in the Insolvent Debtors' Court, and subsequently obtained his personal discharge. On the same day judgment was entered up against him in the name of the official assignee for the full amount of debts stated in the schedule. After this was done the plaintiff, who was a scheduled creditor for Es. 5,000, entered into an agreement with the insolvent whereby, in satisfaction of his claim for Rs. 5,000, he agreed to accept from the insolvent a present cash payment of Rs. 800, and either the execution of a conveyance to him of a certain property or the payment of a further sum of Rs. 1,600 in cash (see s. 63, post}. The creditor sued the insolvent on the agreement, and one of the defences was that there was no consideration. It was held that the defendant's promise was not without consideration, for the plaintiff by the agreement impliedly gave up his right to share in any future rateable distribution under s. 86 of the Insolvent Debtors Act, and also the right accessory thereto, namely, of opposing the final discharge of the insolvent. The agreement, however, was held to be void as being against public policy within the provisions of s.230). Explanation 1 needs no comment. It may be taken as a statement made by way of abundant caution. Explanation 2 declares familiar principles of English law and equity. First, the Court leaves parties to make their own bargains ; it will not set (t) Heera Loll v. Dhunput Singh (u) Per Cur. in Naorojl v. Kazi Sidick (1878) 4 Cal. 500; Billings v. The Un- (1896) 20 Bom. 636, 642, 643. covenanted Service Sank (1881) 3 All. (#) See last note. 781; Shripatrav v. Gorind (1890) 14 (y) See pp. 112, 129, above. Bom. 390. VALUABLE CONSIDERATION. up its own standard of exchangeable values. There must be some con- S. 25. sideration which the law can regard as valuable ; but the fact that a promise is given for a certain consideration, great or small, shows that the promisor thought the consideration worth having at the price of his promise. Hobbes, though not a lawyer and having no love for the Common Law, correctly expressed its doctrine when he said in his " Leviathan " : " The value of all things contracted for is measured by the appetite of the contractors, and therefore the just value is that which they be contented to give." One or two English examples will suffice. Parting with the possession of goods, even for a very short time, and though it does not appear what advantage the promisor was to have from it, is consideration enough for a promise to return them in the same condition (z). An agreement to continue, though not for any defined time, an existing service, determinable at will, is a sufficient con- sideration (). If the owner of a newspaper offers the financial editor's advice to readers who will send their queries to a given address, the trouble of sending an inquiry is a sufficient consideration for an under- taking that reasonable care shall be used to give sound advice in answer thereto. It would seem that a contract is concluded as soon as the reader has sent in his inquiry, the general offer being not merely an invitation, but the proposal of a contract (see p. 45 sqq. above) ; though it would also seem that only nominal damages would be recoverable if the editor did not answer at all(>). Secondly, the fact that a consideration is grossly inadequate may nevertheless be material as evidence of coercion, fraud, or undue influence. The leading modern dictum on this subject will immediately be given as cited in an Indian case by the Judicial Committee. It must be remembered that inadequacy of consideration may be evidence that the promisor's consent was not free, but is no more ; it is not of itself conclusive. Standing alone, inadequacy, as such, is not a bar even to specific performance (c). In a suit (d) to set aside a conveyance on the ground of inadequacy of consideration the Judicial Committee observed : " The question then reduces itself to whether there was such an inadequacy of price as to be a sufficient ground of itself to set aside the deed. And upon that subject 0) Bainbrldge v. Flrmstone (1838) 8 English authorities are not quite uniform, A. & E. 743, 53 E. B. 234. but this has been the accepted opinion (a) Gravely v. Barnard (1874) L. E. for about half a century ; see Pollock, 18 Eq. 518. Contract, 7th ed. 620, 621. (V) De la Bere v. Pearson, Ltd. [1908] (d) Ttie Administrator - General of 1 K. B. 280, C. A. Bengal v. Juggeswar Roy (1877) 3 Cal. (c) Specific Belief Act, s. 28 (a). 192, 196. i.e. 11 162 THE INDIAN CONTRACT ACT. Ss. 25, 26. it may be as well to read a passage from the case of Tennent v. Tennents (L. R. 2 Sc. & D. 6) in which Lord Westbury very shortly arid clearly stated the law upon this subject. He says: 'The transaction having clearly been a real one, it is impugned by the appellant on the ground that he parted with valuable property for a most inadequate consideration. My Lords, it is true that there is an equity which may be founded upon gross inadequacy of consideration. But it can only be where the inadequacy is such as to involve the conclusion that the party either did not understand what he was about or was the victim of some imposition.' Their Lordships are unable to come to the conclusion that the evidence of inadequacy of price is such as to lead them to the conclusion that the plaintiff did not know what he was about or was the victim of some imposition." In a case (e) decided by the Bombay High Court before the enactment of the Contract Act, a mortgage was executed by ignorant and illiterate peasants who were seeking to raise moneys for tilling their lands, in favour of the plaintiffs, who were money-lenders by profession. The mortgage included, amongst other unusual provisions, a covenant to sell the property to the mortgagees at a gross undervalue in certain events. In setting aside the mortgage as fraudulent and oppressive, Westropp, C. J., said : " Mere inadequacy of consideration, it is true, unless it be so great as to amount to evidence of fraud, is not sufficient ground for setting aside a contract, or refusing to decree a specific performance of it. Inadequacy of consideration, when found in conjunction with any other such circumstance as suppression of the value of property, mis- representation, fraud, surprise, oppression, urgent necessity for money, weakness of understanding, or even ignorance, is an ingredient which weighs powerfully with a Court of Equity in considering whether it should set aside contracts, or refuse to decree specific performance of them " (/). 26. Every agreement in restraint of the Agreement in . i restraint of mar- marriage or any person, other than a minor, is riage void. void. The wide and unguarded language of this section is taken from the draft Civil Code of New York (s. 836). There is very little positive authority in England, but it seems probable that a contract limited to not (e) Kedari Sin Harm v. Atmarambhat Act and ss. 25 and 28 (a) of the Specific (1866) 3 B. H. C. A. C. 11. Relief Act, See to the same effect (/) 3 B. H. C. A. C. at pp. 18, 19 S/timbhat v. Yesliwantrao (1900) 25 Bom. Compare s. 53 of the Transfer of Property 126. AGREEMENTS IN RESTRAINT OF MARRIAGE OR TRADE. 163 marrying a certain person or any one of a certain definite class of persons Ss- 26, 27. would be held good (#). Apparently such agreements must be held void in British India. Again, an agreement by a Hindu at the time of his marriage with his first wife not to marry a second wife while the first was living would be void according to the literal terms of this section. It may be doubted whether such a result was ever contemplated by the Legislature. But however that may be, it must be remembered that the Hindu law expressly recognises polygamy, and it is not clear that, apart from the present section, agreements of this class would not be void as tending to defeat the provisions of Hindu law (see s. 23, ante). Like observations apply to similar agreements by Mahomedans, who can, according to their law, marry as many as four wives. 27. Every agreement by which any one is restrained A reementin from exercising a lawful profession, trade or restraint of trade business of any kind, is to that extent void. Exception 1. One who sells the goodwill of a business may agree with the buyer to Saving of agree- . . ... ment not to carry refrain from carrying on a similar business, 011 business of which goodwill is within Specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein : Pro- vided that such limits appear to the Court reasonable, regard being had to the nature of the business. Exception 2. Partners may, upon or in anticipation of a dissolution of the partnership, agree that of agreement between partners some or all ol them will not carry on a busi- prior to dissolution ; . ness similar to that of the partnership within such local limits as are referred to in the last preceding exception. Exception 3. Partners may agree that some one or all of them will not carry on any business, other or during con- tinuance of than that of the partnership, during the con- partnership. tmuance of the partnership. () 2b. at p. 145. ^ () Charlesworth v. MacDonald (1898) 00 Charlesworth v. NucDonuld (1898) 23 Bom. 103. See also The 11,-ahniaputra 23 Bom. 103, 112, 113. See also Specific Tea Co., Ltd. v. Scarth (1885) 11 Cal. 545, Itelief Act, s. 57, illustration (d), and 550. Subba Xaidu v. IIujl Badsha (1902) 26 (u) (1897) 22 Bom. 861, 873. AGREEMENTS IN RESTRAINT OF TRADE. 167 mean. There may be contracts which do not come within the terms of that S. 27. section and its exceptions, and yet may be contracts ' in partial restraint of trade/ and as such contrary to public policy and so void (ss. 23, 24, Contract Act). That is the common law doctrine by which restraints of trade, even though partial, are presumed to be bad (z), the presumption being rebuttable. It is for the Court to determine whether the contract be a fair and reasonable one or not, and the test appears to be whether it be prejudicial or not to the public interest, for it is on grounds of public policy alone that these contracts are supported or avoided." And in Nur Ali Dubash v. AMul Ali(y) the Court (consisting of Pigot and Macpherson, J J.) said : " It is not necessary to consider the effect of s. 24 of the Contract Act upon the case, whether, even had the stipulation in partial restraint of trade not been illegal, the defendant's agreement would not nevertheless have been void, part of the consideration for it having been the undertaking by the plaintiff absolutely to refrain from carrying on the business of dubash. Probably that would be the proper construction of the contract." In a Madras case (z) an agreement whereby certain Hindu workers in lead bound themselves not to carry on their business with the assistance of any persons not belonging to their caste was held to be void. The decision was put on the ground that it would be against public policy to give effect to the agreement, as it might cause very serious restraint upon trade operations. There was no reference either in the judgment or argument of counsel to the present section. If there had been, the question might have been considered whether the words " any one " are limited to a party to the agreement, though in this case the parties already purported to restrain themselves to the extent of not employing persons not belonging to their caste, however difficult it might 'be to carry on the business otherwise. These suggestions, however, do not seem sound. The present section is very strong ; it invalidates many agreements which are allowed by the Common Law ; and it does not seem open to the Courts to hold that any agreement inpari materia, not coming within the terms of the section, is void on some unspecified ground of public policy. " So far as restraint of trade is an infringement of public policy, its limits are defined by section 27 " (a). 00 This mode of stating the law is (y) (1892) 19 Cal. 765, 774. erroneous. See per Lindley, L.J., in (r) Vaithelinga v. Saminada (1878) 2 Mills v. Dunham [1891] 1 Ch. 576, 587, a Mad. 44. case which apparently was not before the (#) Pet- Jenkins, C. J., in Fraser fy Co. learned Judge : " You are to construe the v. The flombay Ice Manufacturing Co. contract, and then see whether it is (1905) 29 Bom. 107, at p. 120. legal." .8 THE INDIAN CONTRACT ACT. S. 27. Agreements not in Restraint of Trade. This section aims at "contracts by which a person precludes himself altogether either for a limited time or over a limited area from exercising his profession, trade, or business, not contracts by which in the exercise of his profession, trade, or business, he enters into ordinary agreements with persons dealing with him which are really necessary for the carrying on of his business " (J). In one sense every agreement for sale of goods whether in esse or in posse is a contract in restraint of trade, for if A. B. agrees to sell goods to C. D. he precludes himself from selling to anybody else. But a reasonable construc- tion must be put upon the section, and not one which would render void the most common form of mercantile contracts (c). Thus a stipulation in an agreement whereby the plaintiffs agreed that they would not sell to others for a certain period any goods of the same description they were selling to the defendant is not in restraint of trade (d). Similarly an agreement to sell all the salt manufactured by the defendant during a certain period to the plaintiff at a certain price is not in restraint of trade (e). And where A. agreed to purchase certain goods from B. at a certain rate for the Cuttack market, and the contract contained a stipulation that, if the goods were taken to Madras, a higher rate should be paid for them, it was held that the stipulation for the higher rate was not in restraint of trade (/). All that the contract comes to in such a case is that the vendor is to sell the goods at one price if they are sent to Cuttack, but at another price if they are sent for sale to Madras. Trade combinations. An agreement between manufacturers not to sell their goods below a stated price, to pay profits into a common fund and to divide the business and profits in certain proportions, is not avoided by this section, and cannot be impeached as opposed to public policy under s. 23 (#). The question whether an agreement whereby manu- facturers agree with one another to carry on their works under special conditions, or traders agree amongst themselves to sell their wares at a fixed price, is in restraint of trade has frequently arisen in English Courts. Such agreements have in some instances been disallowed, and in others upheld, according as the restraints were or were not deemed to be in excess of what was reasonably sufficient to protect the interests of (V) Per Handley, J., in Mackenzie v. Mad. 472 ; Sadagopa Ramanjiuh v Striramiah (1890) 13 Mad. 472, 475. Mackenzie (1891) 15 Mad. 79. (f) Ib. at p. 474. (/) Prem Sook v. Dlnirum Chand (/) Aucliterlonle v. Charles Hill (1868) Case [1894] A. C. 535, 564 ; see his judg- 4 M. H. C. 77. ment at large for a full critical discussion 172 THE INDIAN CONTRACT ACT. Ss. 27, 28. Exceptions 2 and 3. Agreements between partners of the kind recognised (though inadequately) by these exceptions have been allowed in England ever since there has been any settled partnership law, and are exceedingly common ; indeed, some such clause is rarely absent from partnership articles. 28. Every agreement, by which any party thereto is restricted absolutely from enforcing his rights Agreements in restraint of legal under or in respect of any contract, by the proceedings void. 111 -i -i usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. Exception 1. This section shall not render illegal a savingof contract contract b y which two or more persons agree tiOTMKs ^te r that lr *^at anv dispute which may arise between may arise. them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. When such a contract has been made, a suit may be brought Suit, barred by f or its specific performance, and if a suit, other than for such specific performance, or for the recovery of the amount so awarded, is brought by one party to such contract against any other such party in respect of any subject which they have so agreed to refer, the existence of such contract shall be a bar to the suit. [Repealed by Specific Relief Act, except in scheduled districts where that Act is not in force.] Exception 2. Nor shall this section render illegal any saving of con- contract in writing, by which two or more tions thafhavT* P ers ns agree to refer to arbitration any ques- aiready arisen. ^ on between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration. Scope of the section. " This section does not apply to contracts which merely contain a provision for referring disputes to arbitration, but to those RESTRAINT OP LEGAL PROCEEDINGS. 173 which wholly or partially prohibit the parties from having recourse to a court S. 28. of law. If, for instance, a contract were to contain a stipulation that no action should be brought upon it, that stipulation would, under the first part of s. 28, be void, because it would restrict both parties from enforcing their rights under the contract in the ordinary legal tribunals ; and so, if a contract were to contain a double stipulation that any dispute between the parties should be settled by arbitration, and that neither party should enforce his rights under it in a court of law, that would be a valid stipulation so far as regards its first branch, viz., that all disputes between the parties should be referred to arbitration, because that of itself would not have the effect of ousting the jurisdiction of the Courts ; but the latter branch of the stipulation would be void, because by that the jurisdiction of the Court would be necessarily excluded " (r). Thus a contract whereby it is provided that all disputes arising between the parties should be referred to two competent London brokers, and that their decision should be final t does not come within the purview of this section (.s). Nor does a contract whereby it is provided that all disputes arising between the parties" should be referred to the arbitration of the Bengal Chamber of Commerce, whose decision shall be accepted as final and binding on both parties to the contract " (). But a stipulation that parties to a reference shall not object at all to the validity of the award on any ground whatsoever before any court of law does restrict a party absolutely from enforcing his rights in ordinary tribunals, and, as such, is void. The Courts have power, in spite of such a stipulation, to set aside an award on the ground of miscon- duct on the part of the arbitrator. It was so held by the Madras High Court in a case (u) in which the agreement to submit to arbitration contained a restrictive stipulation of the above character. The agreement in that case was filed in Court under the provisions of s. 523 of the Code of Civil Procedure, 1882 (x), and the decision was put on the ground that the very filing of the agreement in Court gave the Court jurisdiction under the arbitration chapter to set aside the award on the ground of the arbitrator's misconduct (y}. But the decision, it is submitted, ought not to be different even if the agreement were not filed in Court. For though, in that case, the provisions of the Code would not apply, the award may be set aside in a regular suit on that ground. And the same may now be done (r) Per Garth, C. J., in The Coringa Oil (u) Burla Ranga Reddi v. Kalapalli Co., Ltd. v. Koegler (1876) 1 Cal. 466, Sithaya (1883) 6 Mad. 368. 468, 469, in appeal from same case in 1 (a;) See now Code of Civil Procedure, Cal. 42. 1908, Sched. II., cl. 17. 00 -ft- (y) See ss. 524 and 521 of the Civil (f) Ganges Manufacturing Co., Ltd. v. Procedure Code, now Sched. II., els. 19 Indra Chand (1906) 33 Cal. 1169. and 15. 174 THE INDIAN CONTRACT ACT. S. 28. under the provisions of the Indian Arbitration Act IX of 1899 in those places where the Act applies (z). A party to a submission has the right to have an award set aside on the ground of misconduct on the part of the arbitrator, and a stipulation whereby he binds himself to accept the award as final in all cases has the effect of restricting him absolutely from enforcing his right, and is, therefore, void under the provisions of this section. For the rest, the section before us affirms the Common Law. Its provisions " appear to embody a general rule recognised in the English Courts which prohibits all agreements purporting to oust the jurisdiction of the Courts "(a). It does not affect the validity of compromises of doubtful rights, and this view is supported by the provisions of the Civil Procedure Code, which enable parties to a suit to go before the Court and obtain a decree in terms of a compromise (b). In a case before the Contract Act was passed, it was held by the Privy Council that an agreement whereby the parties to a suit bind themselves before judgment is passed in the Court of first instance to abide by the decree of that Court and forego their right of appeal is valid and binding (c). Following the principle of this decision, it was held by a full Bench of the Allahabad High Court (<1) that an agreement whereby a judgment debtor engaged himself not to appeal against a decree passed against him in consideration of the judg- ment creditor giving him time for the satisfaction of the judgment debt is not prohibited by this section. " By the agreement not to appeal, for which the indulgence granted by the respondents was a good consideration, the appellant did not restrict himself absolutely from enforcing a right under or in respect of any contract. He forewent his right to question in appeal the decision which had been passed by an ordinary tribunal. Such an agreement is in our judgment prohibited neither by the language nor the spirit of the Contract Act, and an Appellate Court is bound by the rules of justice, equity, and good conscience to give effect to it and to refuse to allow the party bound by it to proceed with the appeal " (e). "Rights under or in respect of any contract." The expression " contract " does not include rights under a decree (/). The Code of Civil Procedure contains express provisions as to adjustment of a decree and (z) See ss. 2 and 14. dure Code, 1908, Order 23, r. 3. (a) Anattt Das v. Axhburner fy Co. (c) Mnnshi Amir All v. Maharani (1876) 1 All. 267. See also Kistiiasammy Inderjit Koer (1871) 9 B. L. K. 460. Plllay v. The Municipal Commissioners (d~) Anant Das v. Ashburtier $ Co. for the Town of Madras (1868) 4 M. H. C. (1876) 1 All. 267. 120, 123. (e) lb. at p. 269. (*) Anant Das v. Ashburner # Co. (/) Ramghwlain v. Jariki Rai (1884) (1876) 1 All. 267. See also the Civil Proce- 7 All. 124, 131. RESTRAINT OF LEGAL PROCEEDINGS. 175 postponement of rights under a decree by mutual agreement of parties to a S. 28. suit (see order 21, rule 2). Limitation of time to enforce rights under a contract. Under the provisions of this section, an agreement which provides that a suit should be brought for the breach of any terms of the agreement within a time shorter than the period of limitation prescribed by law is void to that extent. The effect of such an agreement is absolutely to restrict the parties from enforcing their rights after the expiration of the stipulated period, though it may be within the period of limitation. No provision is made in the section for agreements extending the period of limitation for enforcing rights arising under it. In a case before the Judicial Committee (g) their Lordships expressed their opinion that an agreement that, in consideration of an inquiry into the merits of a disputed claim, advantage should not be taken of the Statute of Limitations in respect of the time employed in the inquiry is no bar to the plea of limitation, though an action might be brought for breach of such an agreement. The action would be one apparently for damages, and the recognition of the right to bring such an action is inconsistent with the view that the agreement is void, that is, not enforceable by law (s. 2 (g) ). It is submitted that an agreement which provides for a longer period of limitation than the law allows does not lie within the scope of this section. Such an agreement certainly does not fall within the first branch of the section. There is no restriction imposed upon the right to sue ; on the contrary, it seeks to keep the right to sue subsisting even after the period of limitation. Nor is this an agreement limiting the time to enforce legal rights. It might be argued, however, that it is void under s. 23, as tending to defeat the pro- visions of the Statute of Limitations. But this does not seem consistent with the policy of the rule allowing validity, subject to conditions of form, to promises to pay time-barred debts (s. 25 (3), above). " Ordinary Tribunals." A clause in a bill of lading whereby it was agreed that questions arising on the bill should be heard by the High Court of Calcutta instead of the Court at Mirzapur, which was the proper tribunal to try the questions, is void, and cannot be pleaded in bar of a suit brought in the Mirzapur Court (K). Exception 1. This exception " applies only to a class of contracts where (as in cases of Scott v. Avery(i] and Tredwen v. Holman (Jc), cited by Phear, J. (I) ) the parties have agreed that no action shall be brought (g) The East India, Co. v. Odtichurn (0 (1855) 5 H. L. C. 811. Paul (1849) 5 M. I. A. 43, 70. (k) (1862) 1 H. & C. 72. (/<) Craidey v. Luclimee Ram (1866) 1 (I) In Kocgler v. The Connga Oil Co. Agra, 129. Ltd. (1875) 1 Cal. 42, 51. 176 THE INDIAN CONTRACT ACT. g gg until some question of amount has first been decided by a reference, as, for instance, the amount of damage which the. assured has sustained in a marine or fire policy. Such an agreement does not exclude the jurisdiction of the Courts ; it only stays the plaintiff's hand till some particular amount of money has been first ascertained by reference " (m). An agreement between a tramway company and a conductor that the manager of the company shall be the sole judge as to the right of the company to retain the whole or any part of the deposit to be made by the conductor as security for the discharge of his duties, and that his certificate in respect of the amount to be retained shall be conclusive evidence between the parties in Courts of justice, comes within this exception. Such an agree- ment does not oust the jurisdiction of the Courts. Its effect is merely to constitute the manager the sole arbitrator between the company and the conductor as to whether, in the event of the conductor's misconduct, the company is entitled to retain the whole or any part of the deposit. The point is very similar to those which so frequently pccur in England, where an engineer or architect is constituted the arbitrator between a contractor and the person who employs him as to what should be allowed in case of dispute for extras or penalties (n). It must not be supposed that the use of such terms as " sole judge " necessarily imposes any duty of proceeding in a quasi -judicial manner. This class of cases must be distinguished from those where the obliga- tion of a promisor, such as the duty of paying for work to be done or goods to be supplied, is made, by the terms of the contract, to depend on the consent or approval of some person, as, in a builder's contract, the certificate of the architect that the work has been properly done. Here there is no question of referring to arbitration, or anything like arbitration, a dispute subsequent to the contract, but the contract itself is conditional, or, in the language of the Act, contingent (ss. 31 36, below). Exception 1, Second Clause. This clause was repealed by the Specific Relief Act. S. 21 of that Act provides that, " save as provided by the Code of Civil Procedure, no contract to refer a controversy to arbitration shall be specifically enforced ; but if any person who has made such a contract, and has refused to perform it, sues in respect of any subject which he has (/) Per Garth, C.J., in The Coringa Oil Kuppusami Naidu v. Smith $ Co. (1895) Co., Ltd. v. Koegler (1876) 1 Cal. 466, 469 ; 19 Mad. 178 ; and see Perry v. Liverpool Cooverjl v.* Bhlmji (1882) 6 Bom. 528, Malt Co. [1900] 1 Q. B. 339, C. A. ; as to 536. the immunity of the person appointed a () Aghore Nauth Bannerjee v. The quasi-arbitrator from being sued for Calcutta Tramways Co., Ltd. (1885) 11 negligence, C/tambersv. Goldthorpe [1900] Cal. 232, following London Tramways Co. 1 K. B. 624, C. A. v. Bailey (1877) L. K. 3 Q. B. D. 217; RESTRAINT OF LEGAL PROCEEDINGS. 177 contracted to refer, the existence of such contract shall bar the suit." If a Ss. 28, 29. suit is brought in respect of any such subject, it must be shown by the defendant, before he could rely upon the section as a bar to the suit, that the agreement is still operative (0), and that the plaintiff has refused to perform it. The mere act of filing the plaint is not such a refusal (p). Remedies for breach of agreement to refer. There are three remedies open to a party to a reference for breach of the agreement. He may sue for damages for the breach, or he may have the agreement specifically per- formed in the manner provided by the Code of Civil Procedure (q), or he may plead the agreement in bar of any suit that may be brought against him in violation of the terms of the agreement, as provided by the Specific Relief Act, s. 21. But the provisions of the code and of the Specific Relief Act are repealed by the Indian Arbitration Act (r), and they have no opera- tion wherever that Act applies (s). Both these remedies, however, are still available, but in a somewhat different form, under the provisions of the Arbitration Act. Conventional restrictions of Evidence. An agreement purporting to prevent the ordinary evidence of payment between the parties from being received has been disregarded as being an unwarrantable interference with the jurisdiction of the Court. Where a bond contained a stipulation enabling the obligee to treat as a nullity payments not endorsed in writing on the bond, it was held that the stipulation was against good conscience and did not preclude the obligor from proving payments alleged to have been made by him by oral evidence (/). Such a stipulation " cannot be permitted to control Courts of justice as to the evidence which, keeping within the rules of the general law of evidence in this country, they may admit of payments. There is nothing in that law which would warrant our Courts in excluding direct oral evidence of payment." Agreements void 29. Agreements, the meaning of which for uncertainty. - g no cer t, a i n) or capable of being made certain, are void. Illustrations. (a) A. agrees to sell to B. "a hundred tons of oil." There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. 0) Takal Y. Bisliesliar (1885) 8 All. (q) See Sched. II. cl. 17, 19. 57 ; Slieoamlar v. Deodat (1886) 9 All. (/) See s. 3 of the Act. 168, 172. (*) See s. 2 of the Act. (p) Xoomud Chunder Dass v. Ckunder () Narayan Undlr Patil v. Motila Kant Mookerjee (1879) 5 Cal. 498 ; TaUcd Jlamdas (1875) 1 Bom. 45. v. Jiifskeahar (1885) 8 All, 57, i.c, 12 178 THE INDIAN CONTRACT ACT. g t 29. (b) A. agrees to sell to B. one hundred tous of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void. (c) A., who is a dealer in cocoanut-oil only, agrees to sell to B. " one hundred tons of oil." The nature of A.'s trade affords an indica- tion of the meaning of the words, and A. has entered into a contract for the sale of one hundred tons of cocoanut-oil. (d) A. agrees to sell to B. "all the grain in my granary at Eamnagar." There is no uncertainty here to make the agreement void. (e) A. agrees to sell to B. "one thousand maunds of rice at a price to be fixed by C." As the price is capable of being made certain, there is no uncertainty here to make the agreement void. (f) A. agrees to sell to B. " my white horse for rupees five hundred or rupees one thousand." There is nothing to show which of the two prices was to be given. The agreement is void. Ambiguous contracts. The text and (with one addition) the illustra- tions of this section follow the draft of the Indian Law Commissioners with only formal variation. As the illustrations are plain, and sufficient to explain the meaning of the section, it seems useless to add others from English decisions. S. 93 of the Evidence Act provides that when the language of a docu- ment is ambiguous or defective no evidence can be given to explain or amend the document. See also ss. 94 97 of the same Act. Neither will the Court undertake to supply defects or remove ambiguities according to its own notions of what is reasonable ; for this would be not to enforce a contract made by the parties, but to make a new contract for them. The only apparent exception to this principle is that when goods are sold without naming a price, the bargain is understood to be for a reasonable price (see s. 89, p. 374, below). This was probably introduced in England on the assumption that there was an ascertain able market price, and then extended to all cases. . S. 21 of the Specific Relief Act provides that a contract of which the Court cannot find the terms with reasonable certainty cannot be specifically enforced. The provisions of Chap. Ill of that Act for the rectification of instruments in which a real agreement of the parties has been erroneously expressed apply, of course, only to cases where the real agreement can be judicially ascertained. They are taken from some of the worst penned clauses of the New York draft Civil Code, but, as the elementary principles of equity are happily still known in the High Courts, it does not appear that any great harm has been done (). (w) See Pollock, Tagore Lectures on Fraud, etc., in British India, 118124. AMBIGUOUS CONTRACTS. 179 Where the defendants, describing themselves as residents of a certain Ss. 29, 30 place, executed a bond and hypothecated as security for the amount " our property, with all the rights and interest " (#), it was held that the hypothecation was too indefinite to be acted upon. The mere fact that the defendants describe themselves in the bond as residents of a certain place is not enough to indicate their property in that place as the property hypothecated. If they had described themselves as the owners of certain property it would then have been reasonable to refer the indefinite expression to the description (y). And where the defendant passed a document to the Agra Savings Bank whereby he promised to pay to the manager of the bank the sum of Rs. 10 on or before a certain date " and a similar sum monthly every succeeding month," it was held that the instrument could not be regarded as a promissory note (z), as it was impossible from its language to say for what period it was to subsist and what amount was to be paid under it (a). Similarly it has been held that a stipulation in a,patta (lease) whereby the tenant agreed to pay whatever rent the landlord might fix for any land not assessed which the tenant might take up (presumably without permission) is void for uncertainty. Under such &patta, the landlord might fix any rent he liked, and the tenant might be liable for an unreasonable rent beyond the value of the land (V). But where the proprietor of an indigo factory mortgaged to B. all the indigo cakes that might be manufactured by the factory from crops to be grown on lands of the factory from the date of the mortgage up to the date of payment of the mortgage debt, it was held that the terms of the mortgage were not vague, and that the mortgage was not void in law (c). 30. Agreements by way of wager are void ; and no Agreements by snit sna11 be brought for recovering anything way of wager void. a u e g e ^ to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. (^) The original words were hakiyat to the order of, a certain person, or to the ajme Ml haq haquk. bearer of the instrument. See Negotiable (y) Deojit v. Pltanibar (1870) 1 All. Instruments Act XXVI of 1881, s. 4. 975. (a) Carter v. The Agra Savings Sank (c) A promissory note is an instrument (1883) 5 All. 562. in writing (not being a bank note or a (i) Ramasami v. Eajagopala (1887) 11 currency note) containing an uncondi- Mad. 200. tional undertaking signed by the maker - (c) Baldeo Parsluid v. Miller (1904) to pay a certain sum of money only to, or 31 Cal. 667, 676 678. 122 180 THE INDIAN CONTRACT ACT. S. 30. This section shall not be deemed to render unlawful a Exception in subscription or contribution, or agreement to priSfor ^ora" subscribe or contribute, made or entered into racing - for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race. Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to Section 294A of . . . . the Indian Penal which the provisions of section 294A of the Code not affected. . Indian Penal Code apply. Wagering contracts. This section represents the whole law of wagering contracts now in force in British India, supplemented in the Bombay Presidency by Act III of 1865. Prior to the enactment of the Contract Act the law relating to wagers was embodied in Act XXI of 1848 (an Act for avoiding wagers). That Act was based principally on the English Gaming Act of 1845 (8 & 9 Viet. c. 109), s. 18, and it was repealed by the Contract Act (see the schedule to the Act). Before the passing of Act XXI of 1848 the law relating to wagers in force in British India was the common law of England. By that law an action might be maintained on a wager, if it was not against the interest or feelings of third persons, did not lead to indecent evidence, and was not contrary to public policy (d). There is no technical objection to the validity of a wagering contract. It is an agreement by mutual promises, each of them conditional on the happening or not happening of an unknown event. So far as that goes promises of this form will support each other as well as any other reciprocal promises. It would have been better if the Courts in England had refused, on broad grounds of public policy, to admit actions on wagers ; but this did not occur to the Judges until such actions had become common ; and, until a remedy was provided by statute, they could only find reasons of special public policy in special cases, which they did with almost ludicrous ingenuity (e). What is a Wager ? A wager has been defined as a contract by A. to pay money to B. on the happening of a given event, in consideration of B. (d) Bamloll T/iackoorseydass v. Soo- M. I. A. 251. ju in null Dhondmull (1848) 4 M. I. A. 339 ; (e) Pollock, Contract, 7th ed. 313 ; and Doolubdass Pettamberdass v. Ramloll see for the history of English legislation llnirliuorse.ijduts (1850) 5 M. I. A. 109; Anson, llth ed. 209 sqq. Rughoonauth v. ManicMiund (1856) 6 WAGERING CONTRACTS. 181 paving [this should be " promising to pay "] to him money on the event not happening (/). But Sir "William Anson's definition, " a promise to give money or money's worth upon the determination or ascertainment of an uncertain event," is neater and more accurate. " To constitute a wager ' the parties must contemplate the determination of the uncertain event ' on which the risk depends ' as the sole condition of their contract. One may thus distinguish a genuine wager from a conditional promise or a guarantee': Anson, Law of Contract [llth ed. 207]. But if one of the parties has ' the event in his own hands,' the transaction lacks an essential ingredient of a wager " () See especially The Universal Stock Exchange, Ltd. v. Strachan [1896] A. C. 166, and In re Gieve [1899] 1 Q. B. 794, both decided under the English Act of 1845. (^) Doshi TalaJishi v. Shah Ujamsi Vein (1889) 24 Bom. 227, 229. (/) He Gieve [1899] 1 Q. B. 794, C. A. 00 Perosha v. Manekji (1898) 22 Bom. 899, 903 ; The Universal Stock Excliange v. Strachan [1896] A. C. 166; Eshoor Doss v. Venltatambba JRau (1895) 18 Mad. 306. (t) J. H. Tod v. LaWimidas (1892) 16 Bom. 441, 445, 446 ; Ajudhia Prasad v. Lalman (1902) 25 All. 38 ; Sassoon v. Tohersey (1904) 28 Bom. 616 ; Motilal v. Govindram (1905) 30 Bom. 83; Httrmnk/t- rai v. Narotamdaas (1907) 9 Bom. L. R. 125 ; Kemrlchand v. Menvanjee (1899) 1 Bom. L. R. 263. WAGERING CONTRACTS. 183 but only to pay or receive money between one another according as the S. 30. market price of the goods should vary from the contract price at the given time, that is not a commercial transaction, but a wager on the rise or fall of the market." This was laid down by the Judicial Committee in Kong Yee Lone & Co. v. Loiujee Nanjee(u] on appeal from the Court of the Recorder of Rangoon. The plaintiff in that case was a rice trader ; the defendants were rice millers, having a small mill capable of putting out 30,000 bags in a month. During seven weeks in June, July, and August, 1899, the defendants entered into several contracts with the plaintiff for the sale to him of 199,000 bags of rice at various prices, aggregating upwards of five crores of rupees, and the latest delivery was to be on 7th October, 1899. The rice was to be delivered from amongst a number of specified mills, in which the defendants' mill was not included. In the same year by fourteen contracts, ranging in time from January to the end of August, the defendants sold to the plaintiff 22,250 bags of rice, to be delivered from the defendants' mill. The latter contracts were all duly fulfilled by delivery and payment. None of the former contracts were performed, and the defendants passed to the plaintiff a promissory note for "difference on rice." In a suit upon the note it was held by the Recorder of Rangoon that there was no common intention to wager, and that the plaintiff was entitled to succeed. The judgment was reversed by the Judicial Committee on appeal, on the ground that the consideration for the note was a number of wagering contracts within the meaning of the present section. Their Lordships observed: "Now the output of the firm itself would not be much over 60,000 bags during the currency of the contracts ; and they (defendants) had dealings with other persons besides the plaintiff. The capital of the firm as stated was a trifle more than a lac of rupees. The cost of the goods would be that amount multiplied five hundredfold. It is possible for traders to contemplate transactions so far beyond their basis of trade, but it is very unlikely. In point of fact, they never completed, nor were they called on to complete, any one of the ostensible transactions. The rational inference is that neither party ever intended completion. When the two classes of contracts are compared, the one class suitable to traders, such as the defendants, and fulfilled by them, the other extravagantly large and left without any attempt at fulfilment, the rational inference is strengthened into a moral certainty." Similarly in Doshi TalaTcshi v. Shah Ujamsi Velsi (x) certain contracts were entered into in Dholera for the sale and purchase of Broach cotton, a commodity which, it was admitted, never found its way either () (1901) 29 Cal. 461, 467, L. R. 28 (t) (1899) 24 Bom. 227. Ind. Ap. 239. THE INDIAN CONTRACT ACT. S. 30. by production or delivery to Dholera. The contracts were made on terms contained in a printed form which incorporated the rules framed by the cotton merchants of Dholera. Those rules expressly provided for the delivery of cotton in every case, and forbade all gambling in differences. The course of dealings was, however, such that none of the contracts was ever completed except by payment of differences between the contract price and the market price in Bombay on the vaida (settlement) day. It was held upon these facts that the contracts were by way of wager within the meaning of this section. Jenkins, C.J., said: "Here in each case the contract was made at Dholera, between men of Dholera, and under the rules of Dholera, and from the evidence we know that the witnesses who have been called have not been able to indicate with certainty or even to suggest, with one doubtful exception, a single instance since the formulation of those rules in 1892 in which any one of the numerous contracts similar to that with which we are now dealing has been completed otherwise than by payment of differences. Is it an unnatural or strained inference to draw from these facts that behind these apparently innocent documents there is a tacit and recognised understanding according to which parties who enter into these contracts do so without any intention of performing them otherwise than they have consistently and without exception been performed, that is to say, by payment of differences ? In my opinion that is the reasonable and natural inference to be drawn ; it agrees with the experience of the past ; and it represents the actual results in the particular instances we are now considering." On the other hand, the modus operand* may be such as to raise a presumption against the existence of a common intention to wager. This frequently happens when agreements of a speculative character are entered into through the medium of brokers, and when, according to the practice of the market, the principals are not brought into contact with each other, nor do they know the name of the person with whom they are contracting, until after the bought and sold notes are executed. Under circumstances such as these, when a party launches his contract orders he does not know with whom the contracts would be made (y). And this presumption is con- siderably strengthened when the broker is authorised by the principal to contract with third persons in his (the broker's) own name ; for the third person may in such case remain undisclosed even after the contract is made (z). But the presumption may be rebutted by evidence of a common intention to wager, though the contract has been brought about by a GO J. H. Tod v. Lakhmidas (1892) 16 899 ; Sassoon v. Toltersey (1904) 28 Bom. Bom. 441, 446. 616. (X) Peronh-a v. Manekji (1898) 22 Bom. WAGERING CONTRACTS. 185 broker. Thus in Eshoor Doss v. Venlcatasulba Rau (a) the same broker S. 30. had acted for both the plaintiff and the defendant, and it was found that, though the parties were not brought into contact at the time defendant contracted to sell Government paper to plaintiff, each had made inquiry beforehand of the broker, not whether the other would be able to deliver Government paper, but whether he would be able to pay differences, and this circumstance along with other circumstances was deemed sufficient to establish that the intention on either side was to pay differences only. The presumption against a wager was applied in a case where the transactions were in Government paper to the extent of about half a crore of rupees, and the plaintiff was both stockbroker and stockjobber, and the defendant was a stockjobber. The magnitude of the transactions in the case was set up by the defendant to support the contention that the transactions were by way of wager, and reliance was placed on the Privy Council decision in Kong Yee Lane's case, cited above. But the contention was overruled and the Court said : "In the Privy Council case, the defendant was a rice miller or a producer by trade, and the wager related to quantities of rice enormously out of proportion to his output and capital, deliverable at option from a number of specified mills. Here there is, I think, sufficient proof that the defendant was known in the market as the largest of jobbers (b), and the capital available for the purchases which he bargained for was at least presumably to be supplied by the constituents for whom a jobber is ordinarily supposed to be acting "(c). An exception has recently been taken to the words " under no circumstances" which occur in the following passage in the judgment of Farran, J., in the case of J. H. Tod v. Lakhmidas (d), referred to above : " Contracts are not wagering contracts unless it be the intention of both contracting parties at the time of entering into the contracts under no circumstances to call for or give delivery from or to each other." On this Bachelor, J., observed in Motilal v. Govindram (e) : " It may perhaps be doubted whether the phrase 'under no circumstances,' which does not appear to have been prominently brought before the Court of Appeal in Doshi Talakshfs case (/), is not rather an overstatement of the requirements of the law ; and upon this point I would refer to the decision in In re Gieve " (, SUch 6Vent haS not happened, fixed time. or j^ before the time fixed, such event becomes impossible. (*) Choke, J., Y. B. 21 Ed. IV. 55, pi. 26. CONTINGENT CONTRACTS. 201 Contingent contracts to do or not to do anything if a Ss. 35, 36. specified uncertain event does not happen When contracts may be enforced within a fixed time may be enforced by law which are con- tingent on specified when the time fixed has expired and such event not happen- ing within fixed event has not happened, or, before the time fixed has expired, if it becomes certain that such event will not happen. Illustrations. (a) A. promises to pay B. a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year; and becomes void if the ship is burnt within the year. (b) A. promises to pay B. a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within. the year, or is burnt within the year. 36. Contingent agreements to do or not to do anything, if an impossible event happens, are void, Agreement con- . tingent on impos- whether the impossibility or the event is sible events void. . , known or not to the parties to the agreement at the time when it is made. Illustrations. (a) A. agrees to pay B. 1,000 rupees if two straight lines should enclose a space. The agreement is void. (b) A. agrees to pay B. 1,000 rupees if B. will marry A.'s daughter 0. C. was dead at the time of the agreement. The agreement is void. The two last foregoing sections explain themselves. Before leaving this chapter we may note that somewhat similar provisions as to transfers of property made subject to conditions occur in the Transfer of Property Act, 1882 ; see especially ss. 25 34. A conditional transfer of property, though it may be, and often is, made in pursuance of a contract, is not, of course, itself a contract. It was therefore necessary to lay down distinct and independent, though more or less analogous, rules for such transactions. THE INDIAN CONTRACT ACT. S "Vt CHAPTEK IV. OF THE PERFORMANCE OF CONTRACTS. Contracts which must be per/owned. 37. The parties to a contract must either perform, or obligation of ff er to perform, their respective promises, parties to contracts. un i esg gucn performance is dispensed with or excused under the provisions of this Act, or of any other law. Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract. Illustrations. (a) A. promises to deliver goods to B. on a certain day on payment of Es. 1,000. A. dies before that day. A.'s representatives are bound to deliver the goods to B., and B. is bound to pay the Es. 1,000 to A,'s representatives. (b) A. promises to paint a picture for B. by a certain day, at a certain price. A. dies before the day. The contract cannot be enforced either by A.'s representatives or by B. Performance and discharge. A contract, being an agreement enforce- able by law (s. 2, p. 11, above), creates a legal obligation, which subsists until discharged. Performance of the promise or promises remaining to be performed is the principal and most usual mode of discharge, but there are several others. Accordingly the usual method of approved text-writers is to make Discharge of Contract a main head of the subject, and treat of Performance and other ways of discharge, such as agreement of the parties, breach of the contract, and operation of law, under distinct chapters or subdivisions, as may be seen in the works of the late Mr. Leake and of Sir W. Anson. This Act, for some reason which does not appear, has made " The Performance of Contracts " the principal title, with the some- what curious result of including under it a group of sections (G2 67) on " Contracts which need not be performed." Whatever may be the merits of this innovation, elegance is not one of them. It is sufficient for practical purposes, however, if the law is intelligibly stated in some kind of coherent order. The sections (51 58) on the Performance of Reciprocal Promises really belong to the head of interpretation, which is not separately dealt with by the Act. DUTIES AND RIGHTS OF REPRESENTATIVES. 203 This section has some resemblance to a clause of the original draft S. 37. (cl. 30), which, however, seems rather intended to define what performance is sufficient than to lay down any duty of performance in general. As to performance by an agent, see s. 40, below. The rule of the Common Law which is here affirmed in the second paragraph was stated in England in 1869 by Willes, J., a judge of very great learning and authority : " Gene- rally speaking, contracts bind the executor or administrator, though not named. Where, however, personal considerations are of the foundation of the contract, as in cases of principal and agent and master and servant, the death of either party puts an end to the relation (fy and, in respect of service after the death, the contract is dissolved, unless there be a stipulation express or implied to the contrary " (u). Such personal considerations as are here mentioned extend, as shown by illustration (b) to the present section, to contracts involving special per- sonal confidence or the exercise of special skill (cp. s. 40, p. 223, below). They do not extend to mere exercise of ordinary discretion. The executors of a man who has ordered goods deliverable by instalments under a continuing contract may be bound to accept the remaining instalments, for the duty or discretion of seeing that the goods supplied are according to contract does not require any personal qualification (#). Succession to benefit of contract. Neither the present section nor anything else in the Act lays down any rule as to the manner in which or the extent to which persons other than the original promisee may become entitled to enforce a promise. Generally the representatives of a deceased promisee may enforce subsisting contracts with him for the benefit of his estate. It is no real exception to this rule that in some cases the nature of the contract is in itself, or may be made by the intention of the parties, such that the obligation is determined by the death of the promisee. The most obvious example is the contract to marry in the Common Law. Another more seeming than real exception is where performance by the other party is conditional on some performance by the deceased which was not completed in his lifetime and is of such a personal character that performance by his representatives cannot be equivalent. An architect's executor, for example, cannot insist on completing an unfinished design, even if he is a skilled architect himself ; and accordingly he cannot fulfil the conditions on which (t) The use of "relationship" as (w) Farrow v. Wilton, L. R. 4 0. P. equivalent to " relation " in this sense has 744, 746. been common for some years, but is (a?) Wentworth v. Cock :(1839) 10 A. &E. improper. Willes, J., would certainly not 42, 60 R. R. 316. Lave approved it. THE INDIAN CONTRACT ACT. S. 37. payment, or further payment, as the case may be, would have become due. But a builder's executors may be entitled and bound to perform his con- tracts for ordinary building work, for they have only to procure workmen of ordinary competence, and similarly in other cases. It is to be remem- bered that all rules of this kind are in aid of the presumed intention of the parties, and if the parties have expressed a special intention it must prevail. Payments actually earned and due to a man before his death, though for services of a confidential or personal kind, are a portion of his estate as much as any other debts, and accordingly his representatives succeed to his right of action for them, and may recover them. This is indeed, as a general proposition, elementary, though doubts may be raised on particular facts as to what were exactly the rights acquired by an original contracting party in his lifetime (y). The same rule applies to rights of action for conventional damages or penalties (2). But a cause of action for damages for injuries of a merely personal nature, though arising out of a breach of contract, cannot be sued upon by or against executors (a). So it is in the case of breach of promise of marriage in England (b), at all events unless special pecuniary damages can be proved ; and so it is understood to be with regard to personal injuries caused by negligence in the performance of a contract, though, as above mentioned, a sum agreed in the party's lifetime as compensation even for such injuries is part of his personal estate, and the right to sue for it passes to his representatives. " Although a right of action for not marrying or not curing, in breach of an agreement to marry or cure, would not generally pass to the assignees [in bankruptcy], I conceive that a right to a sum of money, whether ascertained or not, expressly agreed to be paid in the event of failing to marry or to cure, would pass " (c). (y) Stubbs v. Holywell R. Co. (1867) destroy rights of action which he had L. R. 2 Ex.311. The argument for the already acquired. defendant was that the contract was (z) Becliham, v. Dralte (1849) 2 H. L. C* really entire, and the payment by instal- 579, 81 R. R. 301. ments only a matter of convenience, and (a) See Indian Succession Act, 1865, that the full performance of the contract s. 268, and Probate and Administration had become impossible by the original Act, 1881, s. 89. party's death. But such an argument (i) Clutmlerluin v. Williamson (1814) could be maintained only by showing that 2 M. & S. 408, 15 R. R. 295; Fluliiy v in his lifetime he could not have sued for C/iirney (1888) 20 Q. B. Div. 494. any instalment until he had done the (>) Opinion of Maule, J., given to the whole of the work, which would reduce House of Lords in Seckham v. Dralte the contract to an absurdity. His death (1849) 2 H. L. C. at p. 622, 81 R. R. 329. put an end to the contract, but did not ASSIGNMENT OF CONTRACTS. The rights of an insolvent debtor's assignees to sue on his contracts depend, of course, on statute ; but in the absence of more specific provisions they are governed by the same principles as an executor's. Assignment of contracts. Broadly speaking, the benefit of a contract can be assigned, bjat_j^_ih__huideji, subject to the same exception of strictly personal contracts that has been mentioned as affecting the powers and duties of executors. The principles were lately laid down anew by the Court of Appeal in England : " Neither at law nor in equity could the burden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee. A debtor cannot relieve himself of his liability to his creditor by assign- ing the burden of the obligation to some one else ; this can only be brought about by the consent of all three, and involves the release of the original debtor. ... On the other hand, it is equally clear that the benefit of a contract can be assigned, and wherever the consideration has been executed, and nothing more remains but to enforce the obliga- tion against the party who has received the consideration, the right to enforce it can be assigned, and can be put in suit by the assignee in his own name after notice. . . . There is, however, another class of contracts, where there are mutual obligations still to be enforced, and where it is impossible to say that the whole consideration has been executed. Contracts of this class cannot be assigned at all in the sense of discharging the original contractee and creating privity or quasi-privity with a substituted person. . . . To suits on these contracts, therefore, the original coutractee must be a party, whatever his rights as between him and his assignee. He cannot enforce the contract without showing ability on his part to perform the conditions performable by him under the contract. This is the reason why contracts involving special personal qualifications in the contractor are said, perhaps somewhat loosely, not to be assignable." Not that the burden of a contract can ever really be assigned, but sometimes it may be discharged by a delegated performance (in which case it does not matter to the promisee what are the exact relations of agency or otherwise between the promisor and his delegate), and sometimes not (d). The Contract Act has no section dealing generally with assignability of contracts. A contract which, under section 40, is such that the promisor must perform it in person has been held not to be assignable. " When considerations connected with the person with whom a contract is made form a material element of the contract, it may well be that such a contract on that ground alone is one which could not be assigned without the (. (1906) 33 Cal. 702, affirmed on appeal 34 Cal. 289. (Z) Ibid., p. 707. ASSIGNMENT OF CONTRACTS. 207 We next proceed to consider whether a contract for the future delivery S. 37. of goods can be assigned under the Indian law ; that is, if A. agrees to sell, say, rapeseed, cotton, or gunny bags to B., deliverable at a future day, whether either party can assign the contract without the consent of the other, while the contract is still executory, so as to enable the assignee to maintain an action in his own right and in his own name. In Tod v. Lakhmidas (m~), decided in the year 1892, it was held by the High Court of Bombay that neither the seller nor the buyer of goods, where the goods are to be delivered at a future day, can assign the contract, before the date fixed for delivery, to a third person without the consent of the other so as to entitle the assignee to sue in his own name ; but that there was no objection to a suit brought by the assignor and assignee as co-plaintiifs, for when the suit is by them both, there is no question as to which of them is to recover (ri). The decision expressly proceeded upon the principle of the English law that where a contract is still executory the burden thereof cannot be assigned. The Court was not called upon to decide whether the interest of the seller or buyer in the contracts was assignable as an action- able claim within the meaning of the Transfer of Property Act ; for that Act, though passed in the year 1882, was not extended to the Bombay Presidency until 1st January, 1893, and the case was heard and decided about eleven months before that date (0). Anactionable claim is defined in s. 3 of that Act as a claim to any debt (except secured debts), or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, whether such debt or beneficial interest be existent, accruing, conditional, or contingent. An actionable claim can always be assigned, but the assignment, to be complete and effectual, must be effected by an instrument in writing ; and upon the execution of such instrument all the rights and remedies of the assignor vest in the assignee, who may thereupon sue in his own name without making the assignor a party to the suit (p). As regards the interest of a buyer of goods in a contract for forward delivery, it has now been held by the High Court of Calcutta, in Jaffer Meher All v. Budge Budge Jute Mills Go. (q), and by the High Court of Bombay, in Hunsraj Morarji v. Nathoo Gangaram (r), that such interest is an actionable claim within the meaning of the Transfer of Property Act, and may be assigned as such so as to (/) (1892) 16 Bom. 441. Chief Court of Lower Burma. () Ibid. ; Jhcan v. Ilaji Oosnian (p) Transfer of Property Act, 1882, (1903) 5 Bom. L. R. 37)5. s. 130, as amended by Act II of 1900. 0) The Act is not yet extended to the (//) (1906) 33 Cal. 702, affirmed on Punjab, nor to British Burma, except the appeal in 34 Cal. 289. area included within the local limits of (r) (1907) 9 Bom. L. R. 838. the ordinary civil jurisdiction of the THE INDIAN CONTRACT ACT. enable the assignee to sue in his own name. In the former case Sale, J., said : " The rule as regards the assignability of contracts in this country is that the benefit of a contract for the purchase of goods as distinguished from the liability thereunder may be assigned, understanding by the term benefit the beneficial right or interest of a party under the contract and the right to sue to recover the benefits created thereby. This rule is, however, subject to two qualifications : first, that the benefit sought to be assigned is not coupled to any liability or obligation that the assignor is bound to fulfil, and, next, that the contract is not one which has been induced by personal qualifications or considerations as regards the parties to it. Neither of these exceptions, 1 think, applies to the present case. There is nothing on the face of the contracts to suggest that any credit was given by the defendant company to the original purchaser, or that any circum- stance of an especial or personal character existed which led to the making of the contract between the parties thereto, nor, looking at the terms of the contract, does it appear to impose any liability or obligation of a personal character on the assignor which would prevent the operation of the rule of assignability. The contract is for the sale on the usual terms of a certain quantity of gunny bags to Cassim Karim, and subject to the exercise of certain options the purchaser has an absolute right to call for delivery of the goods on payment of the price. I am inclined to think that the right to claim the benefit of the contract, or, in other words, the right on certain conditions to call for delivery of the goods mentioned in the contract, constitutes a ' beneficial interest in movable property, conditional or con- tingent,' within the meaning of the definition of an actionable claim in section 3 of the Transfer of Property Act, and as such is assignable." And in the Bombay case, where also the assignment was by the buyer, Jenkins, C.J., said : " What was transferred was, in my opinion, property, and under section 6 of the Transfer of Property Act property of any kind may be transferred, except as therein provided. None of the specified exceptions would have included what Shariffbhoy [buyer] purported to transfer, and I further hold that the subject of the transfer was an actionable claim, and so Chapter VIII of the Transfer of Property Act (s) applies. That this view of the Transfer of Property Act does not involve any material change in the law as previously understood in Bombay is apparent from what was said by Westropp, C. J., in Dayabhai Dipchand v. Dulldbhram Dayaram (t)" In the last-mentioned case, A. agreed to sell certain shares to B., deliverable at a future day. A., that is, the seller, assigned the contract to C. (it does not appear exactly when or how), and C. sued B. for damages for refusing (a) That is the Chapter of Transfers of () (1871) 8 B. H. C. 133. Actionable Claims. ASSIGNMENT OF CONTRACTS. 209 to take delivery. The District Judge, without examining the circumstances, Ss. 37, 38. held that such a contract was not assignable, but the case was remitted to him to determine upon all the facts. "Westropp, C. J., said : " The District Judge should . . . have held that in equity it [contract] was assignable for a valuable consideration (Spence, Eq. Juris 852) (u), subject, no doubt. (generally speaking), to the equities (if any) which may have existed between the defendant and the original vendor." It has yet to be decided whether the right of a seller to call for payment of the price of goods on delivery is an actionable claim and as such assignable. The dicta in Jaffer Meher AUv. Budge Budge Jute Mills Co. are wide enough to include the seller's interest. Any other Law. The most important statutory discharge of contracts, outside the present Act, is that which follows on insolvency. See as respects the Presidency towns the Insolvency Act, 11 & 12 Viet. c. 21, and the Provincial Insolvency Act, 1907, as regards those portions of British India to which the Insolvency Act does not apply. See also the notes to ss. 39 and 97. 38. Where a promisor has made an offer of perform- ance to the promisee, and the offer has not Effect of refusal . to accept offer of been accepted, the promisor is not responsible performance. , . , tor non-performance, nor does he thereby lose his rights under the contract. (u) The passage referred to is as follows : he could perform the contract by C.'s " it has always been held in the Court of agency and authorise C. to receive pay- Chancery . . . that the assignment of a ment ; or, when B's undertaking to pay chose in action, founded on a valuable for the shares had become a debt, he consideration, ought to be enforced. So could assign the debt to C. The report the Court of Chancery has given effect to fails to show which of these things he assignments of every kind of future and really did, but it is not strictly material contingent interests and possibilities in to the decision of the High Court, real and personal property, if made for It remains true, as Farran, J., most valuable consideration." This obviously correctly said about twenty years later in relates to the transfer of rights and not the same Court, Tod v. Lakhmidas, 16 to the delegation of duties. The state- Bom, 441, 449, that "a purchaser is ment itself is elementary. All that the entitled to call upon the person with case decides, in point of law, is that the whom he contracted to fulfil his contract, District Judge was wrong in laying down and the latter cannot get rid of his liability as an unqualified proposition that the by transferring it to a third person, but contract was not assignable. A. could must himself perform the contract person- not, of course, delegate his duty under the ally or vicariously." contract to C, without B.'s consent. But i.e. 14 210 THE INDIAN CONTRACT ACT. S. 38. Every such offer must fulfil the following conditions : (1) it must be unconditional : (2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do : (3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of them. Illustration. A. contracts to deliver to B. at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. In order to make an offer of performance with the effect stated in this section, A. must bring the cotton to B.'s warehouse, on the appointed day, under such circumstances that B. may have a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales. Tender. The subject-matter of the present section is to be found under the head of Tender in English books. The first sub-section is chiefly, though not exclusively, appropriate to an offer of payment ; the second and third concern offers of other kinds of performance, such as delivery of goods. The principles were laid down in England two generations ago in Startup v. Hacdonald (x) : " The law considers a party who has entered into a contract to deliver goods or pay money to another as having sub- stantially performed it, if he has tendered the goods or money to the party to whom the delivery or payment was to be made, provided only that the tender has been made under such circumstances that the party to whom it has been made has had a reasonable opportunity of examining the goods or the money tendered, in order to ascertain that the thing tendered really was what it purported to be." As to what are proper time and place see ss. 46 49, pp. 237240, below. () (1843) 5 Man. & G. 693, 610 ; 64 R. R. 810, 824, judgment of Rolfe, B. OFFER OF PERFORMANCE. 211 Offer must not be of part only. With regard to the validity of an S. 38. offer of performance, it must be not only unconditional, but entire ; that is, it must be an offer of the whole payment or performance that is due (/). Words to this effect were in the corresponding clause in the original draft of the Act, and it is not easy to see why they are not as prominent in the section as finally settled. The substance of the rule is, however, in force in British India. It is needless to consider whether this is because the Act does not expressly negative the English rule as already adopted, or because of the words " the whole of what he is bound by his promise to do " in sub-s. (2), or because an offer to pay or perform only in part is not really " an offer of performance " of an entire promise at all. Whatever the reason may be, it has been held by the Higli Court of Calcutta that a creditor is not bound to accept a sum smaller than he is entitled to, and therefore the tender of such a sum does not stop interest running on it (z). In Haji Abdul Rahman v. Haji Noor Mahomed (a), in the High Court of Bombay, the defendant had tendered a sum which was only a small fraction of the whole sum claimed and found due, and one question in the case was whether interest was due, after the date of this offer, on the whole sum or only on the residue. Telang, J., thought that the rule in Dixon v. Clark (Jb], that a tender of part of an entire debt is bad, applied only to cases where the party making the tender admitted more to be due than was tendered, and that it had no application where the debtor tendered the amount as in full payment of the debt. The Court, however, decided against the defendant on the ground that the tender was ineffectual, as it had not been followed by a payment into Court in the suit, as required by an established rule of practice. This opinion of Telang, J., appears, with great respect, to be founded on a misconception both of the principle involved and of the English authorities. A creditor is not bound to accept less than is actually due and payable, and therefore by refusing to accept only a portion of the principal he cannot lose his right to interest on that portion where interest is otherwise payable. A so-called tender of less than the debtor admits to be due is not a tender at all, but an offer of payment on account, which the creditor may accept or not, and risks nothing, in point of law, by not accepting, though it is often, in point of fact, unwise not to take what one can get. Tender is, one may almost say, essentially the offer of a sum which the debtor asserts to be the whole sum (y) Dixon v. Clark (1848) 5 C. B. 365. 3 Cal. 468. (z) Watson % Co.v.Dhonendra Chunder (a) (1891) 16 Bom. 141, 147149. Mookerjee (1877) 3 Cal. 6, 16 ; Chunder (b) 5 C. B. 365 ; 16 L. J. C. P. 237. Caunt Mookerjee v. Jodoonath A7(M(1878) 142 212 THE INDIAN CONTRACT ACT. S. 38. due, but which is less than the creditor claims ; for if the parties are agreed on the amount due, a formal offer is needless and useless. This being so, the creditor refuses the money at his peril in case his further claim turns out unfounded ; but if he accepts, the debtor is still only offering what is due, and the creditor is not bound to make any admission in return. He may take the debtor's offered payment without prejudice to his claim, such as it may be, to a further balance. The debtor is entitled to a receipt for what he pays, but not to a release. It remains to be seen whether there was a discharge or only a payment on account. Hence a tender will be vitiated by the addition of any terms which amount to requiring the creditor to accept the sum offered in full satisfaction, or to admit in any other way that no more is due. Offer must be unconditional. " The person making a tender has a right to exclude presumptions against himself by saying : ' I pay this as the whole that is due ' : but if he requires the other party to accept it as all that is due, that is imposing a condition ; and, when the offer is so made, the creditor may refuse to receive it as a tender " (c). A mere specifying of the account on which a payment is offered, though accompanied by such words as " in settlement " or the like, does not amount to a condition in this sense ; for it is no more than saying that the debtor offers all that he believes to be due (c). More than this, a debtor may tender, expressly under protest, a greater sum than he admits to be due, and thus reserve the right of taking further proceedings to test the justice of the claim. Such a protest does not impose any condition. " The creditor has only to say, ' I take the money ; protest as much as you please,' and neither party makes any admission " (d). A tender of debt before the due date is not a valid tender, and will not prevent interest from running on the loan (0). There are no recent English cases on tender of money debts, and the habits of modern business appear to have greatly diminished the importance of the subject (/). Able and willing. Where a contract for the purchase and sale of Government paper provides for the delivery of the paper to the defendant, it is not necessary that the plaintiff should have taken the Government paper contracted for to the place of business of the defendant and then and there made an actual tender of it. If the plaintiff was ready and willing to perform his part of the contract and did his best to inform the (c) Eowenv. Owen (1817) 11 Q. B. 130, (e) Eshahuq Molla v. Abdul Sari 136, per Erie, J. Haldar (1904) 31 Cal. 183. (d) Scott v. Uxbridge and Richmana- (/) As to tender preventing an act of worth R. Co. (1866) L. R. 1 C. P. 596, bankruptcy, see Ex yarte Danlts (1852) 2 599, per Willes, J. D. M. & G. 936, 95 R. R. 376. OFFER OF PERFORMANCE. 213 defendant by going to his place of business that he was so, that would be S. 38. sufficient, in the absence of evidence to the contrary, to constitute readiness and willingness (g). Where a contract is made for the future delivery of shares, and the purchaser, before the delivery day, gives notice to the vendor that he will not accept the shares, the vendor is thereby exonerated from giving proof of his readiness and willingness to deliver the shares, and the issue as to readiness and willingness is in such a case immaterial (h). As to repudiation of a contract by one party before the time for performance, see farther on, s. 39, p. 220, below. Tender of instalments. A contract made between the plaintiff and the defendant stipulated for delivery to the defendant of 7,500 bags of Madras coast castor seed, which were to be shipped per "steamers," and then stated that shipment of 2,500 bags was to be made in December. Of these 1,690 bags arrived on 12th December, and the plaintiff offered delivery thereof to the defendant, who refused to take them on the ground that he was not bound to take less than the whole of the 2,500 bags at one time. The bags were thereupon resold by the plaintiff. The remain- ing 810 bags, being the balance of the December shipment, arrived on 19th December, but were refused by the defendant on the same ground as before, and those also were accordingly resold by the plaintiff. The plain- tiff sued the defendant for damages for breach of the contract in not accepting the bags. The Court held without difficulty that there was a legal and proper tender of the December shipment by the plaintiff according to the terras of the contract (i). A lender is entitled to decline, in the absence of any agreement as to repayment of the loan, to receive payment of the sum due to him in instalments, and he can claim that the whole sum due be paid at one and the same time (&). Reasonable opportunity. In a Bombay case (/) the defendant agreed to purchase from the plaintiffs 100 bales " fully good fair Kishli cotton," to be delivered from 15th March to 1st April, 1881. On 30th March the plaintiffs sent the defendant a letter enclosing a sampling order, which was received by the defendant's agent at 11.30 a.m. that day. The defendant got samples taken of the cotton, and a dispute having arisen as to the quality and classification of the cotton, the plaintiffs wrote to the defendant (g) Juggernautli Sew Bux v. Ram Dyal 9 Cal. 473. Brandt v. Lawrence (1876) 1 (1883) 9 Cal. 791. Q. B. Div. 344, which the Court cited and (/(.) Dayabkai Dipchand v. Maniklal followed, was a similar case. Vrijbhtiitan (1871) 8 B. H. C. A. C. 123. (&) Beliarl Lai v. Ram Ghulam (1902) See also Dayabhai Dipchand v. Dullabli- 24 All. 461. ram Dayaram (1871) 8 B. H. C. A. C. (T) Ruttonsey v. Jamnadas (1882) 6 133. Bom. 692. (?') Sim-son v. Gora CJiand Doss (1883) 214 THE INDIAN CONTRACT ACT. S. 38. on 31st March asking him to attend with his surveyor at 1 p.m. on that day to survey the cotton, as otherwise an ex parte survey would be held. It being a mail day, the defendant's surveyor could not attend at the appointed hour, and the plaintiffs had an ex parte survey held by their own surveyors, and they pronounced the cotton to be of the description contracted for. Shortly afterwards the defendant asked for a survey by a letter which reached the plaintiffs at 2.19 p.m. on that day. The plaintiffs did not comply with the application, and called upon the defendant to take delivery of the goods. In a suit by the plaintiffs for damages for breach of the contract it was contended for the defendant that no reasonable opportunity was afforded to the defendant to examine the goods, as there was no joint survey, and that the time allowed by the plaintiffs for the examination of the cotton was not sufficient. It was held that the defendant had reasonable opportunity within the meaning of this section.* Latham, J., said: "The rule in the 38th section of the Contract Act agrees with the rule of English law laid down in Benjamin on Sales (2nd ed. pp. 573 and 576) (m) ; but there is little authority as to what is a reasonable opportunity of inspection (n). ... In the present case the sampling order was delivered to the defendant by 11.30 a.m. on the 30th March, and he had till 1 p.m. on the 31st March before any refusal by the plaintiffs to allow a further examination is alleged. Now Vizbhookandas Atmaram seems to have been certainly dilatory in his examination, he not having compared the samples with the standards till past noon on the 31st ; and it seems to me that a period of over twenty-four hours gave a reason- able opportunity to see whether the cotton offered was the cotton which the plaintiffs were bound by their contract to deliver. " Then are we to go further and to say that the purchaser is entitled to continue inspecting and examining until the expiration of the period for delivery ? I find no authority for this, and in many cases it would be unreasonable to place no limit on the inspection. Is a purchaser at liberty to open and taste every bottle of wine in a lot sold, or in the present case to pass every pound of cotton through an expert's hands ? There must be some limit, and I think that a reasonable opportunity is the limit alike for vendor and purchaser, and that such a reasonable opportunity had been had by 1 p.m. on the 31st March." (m) 696, 704, 4th ed. that the person who is to pay for the () Isherwood v. Whit'more (1843) 11 goods shall have an opportunity afforded M. & W. 347, 63 R. R. 624, seems to be the him, before he is called on to part with only case in point. " A tender of goods his money, of seeing that those presented does not mean a delivery or offer of for his acceptance are in reality those for packages containing them, but an offer of which he has bargained " : per Parke, B. those packages under such circumstances TENDER. 215 Tender of money. A creditor is not bound to accept a cheque ; but Ss. 38, 39. if a cheque is tendered and received, and the creditor or his agent objects only to the amount, or makes no immediate objection at all, he cannot afterwards object to the nature of the tender. The landlord of a house, through his agent, sent in rent-bills to his lessee. The lessee gave the agent a cheque in favour of her attorney for the amount demanded, and obtained a receipt from him. The landlord's agent then took the cheque to the lessee's attorney, who cashed it and handed the amount to the agent, and requested him to get the rent-bills receipted and returned to him. The landlord's solicitor, to whom the money was taken, refused to accept it, and the money was then returned to the lessee's attorney. In a suit by the landlord for the rent, it was held that under the circumstances the tender amounted to payment, and the suit was dismissed with costs (0). Legal tender. As to tender of coinage see Indian Coinage Act XXXIII of 1870 (amended by Act VIII of 1893 and Act XXII of 1899), ss. 12 14 ; and as to tender of currency notes, see Paper Currency Act XX of 1882, s. 16, as amended by Act VI of 1903, s. 2. Offer to one of several joint promisees. A tender of rent by a lessee to one of several joint lessors (p ) and of a mortgage debt by a mortgagor to one of several mortgagees (q) would be a valid tender under this section. See the commentary on s. 45. 39. When a party to a contract has refused to perform, or disabled himself from performing his Effect of refusal ... of party to perform promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. Illustrations. (a) A., a singer, enters into a contract with B., the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B. engages to pay her 100 rupees for each night's (o) Bolye Chutid Sing v. Moulard Chinnaramanuja Ayyangar v. Padma- (1878) 4 Cal. 572. Cp. Jones v. Arthur nabha Pillaiyan (1896) 19 Mad, 471. (1840) 59 E. R. 833, 8 Dowl. Pr. Ca. 442. (q) See Barber Maran v. Ramana (_p) Krishnarav v. Manaji (1874) 11 Goundan (1897) 20 Mad. 461, where it B. H. C. 106, where it was held that pay- was held, relying upon this section ment of rent by a lessee to one of several principally, that payment of the amount joint lessors discharges the debt as to all. due on a mortgage by a mortgagor to one But payment to a partner in fraud of his of several mortgagees discharges the co-partners is not a valid discharge : mortgage debt as to all. THE INDIAN CONTRACT ACT. performance. On the sixth night A. wilfully absents herself from the theatre. B. is at liberty to put an end to the contract. (b) A., a singer, enters into a contract with B., the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B. engages to pay her at the rate of 100 rupees for each night. On the sixth night A. wilfully absents herself. With the assent of B., A. sings on the seventh night. B. has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A.'s failure to sing on the sixth night. Refusal to perform contract. It is not easy to see why this section is placed here. The subject-matter would seem really to belong to the category of contracts, not which must, but which need not, be performed, dealt with in ss. 62 67, pp. 261 285, below. Further, it is closely connected with the consequences of breach of contract laid down in Chap. VI. However, a commentator must take the Act as he finds it. As correctly laid down in the High Court of Calcutta when the Act was still recent, "this section only means to enact what was the law in England and the law here before the Act was passed, viz., that where a party to a contract refuses altogether to perform or is disabled from performing his part of it the other side has a right to rescind it " (r). English authorities are collected in the notes to Cutter v. Powell in Smith's Leading Cases (s). The words used by Garth, C.J., " where a party to a contract refuses altogether to perform . . . his part of it," clear up a slight verbal ambiguity in the Act, where the words "his promise in its entirety" mean the substance of the promise taken as a whole. In one sense, refusal to perform any part of a contract, however small, is a refusal to perform the contract "in its entirety"; but the kind of refusal contemplated by this enactment is one which affects a vital part of the contract, and prevents the promisee from getting in substance what he bargained for. The clearest leading case is perhaps -Withers v. Reynolds (f). The action was for not delivering straw to the plaintiff under an agreement whereby the defendant was to supply the plaintiff with straw from October, 1829, to Midsummer, 1830, in specified quantities, and the plaintiff was to pay a named sum per load " for each load of straw so delivered," which the' Court read as meaning that he was to pay for each load on delivery. (r) Per Garth, C.J., in Sooltan Chund some familiarity with the old common v. Schiller (1878) 4 Cal. 252, 255. law system of pleading. (*) Vol. ii. at p. 9, llth ed. This note, (f) (1831) 2 B. & Ad. 882 ; 36 R. R. 782 ; however, is hardly intelligible without Finch, Sel. Ca. 712. REFUSAL TO PERFORM CONTRACT. 217 In January, 1830, the straw having been regularly sent in, and the plaintiff S. 39. being in arrear with his payments, "the defendant called upon him for the amount, and he thereupon tendered to the defendant 111. 11s., being the price of all the straw delivered except the last load, saying that he should always keep one load in hand." The defendant took this payment under protest, and refused to deliver any more straw unless it was paid. for on delivery. The Court held that this gave the plaintiff no right of action, in other words that the defendant was entitled to put an end to the contract. As Parke, J. (as he was then, afterwards better known as Baron Parke), said, " the substance of the agreement was that the straw should be paid for on delivery. . . . When, therefore, the plaintiff said that he would not pay on delivery (as he did, in substance, when he insisted on keeping one load in hand), the defendant was not obliged to go on supplying him/' It is to be observed that, as Patteson, J., added, "if the plaintiff had merely failed to pay for any particular load, that of itself might not have been an excuse to the defendant for delivering no more straw." Later English' authorities have in fact established that mere failure to make one of a series of payments will not generally, in the absence of a prospective refusal, discharge the other party from proceeding with the contract (u). As to failure in performing other particular terms of a contract, no positive general rule can be laid down as to its effect. . The question is in every case whether the conduct of the party in default is such as to amount to an abandonment of the contract or a refusal to perform it, or, having regard to the circumstances and the nature of the transaction, to " evince an intention not to be bound by the contract " (x). It seems, however, with great submission, that the intention which is material is not that with which the contract is broken, but that with which it was made. Parties can undoubtedly make any term essential or non-essential ; they can provide that failure to perform it shall discharge the other party from any further duty of performance on his part, or shall not so discharge him, but shall only entitle him to compensation 'in damages for the particular > breach. Omission to make the intention clear in this respect is the cause I of the difficulties, often considerable, which the Courts have to overcome I in this class of cases. (n) Freeth v. Burr (1874) L. K. 9 C. P. what amounts to a 'refusal ' in cases of 208, Finch, Sel. Ca. 714 ; Mersey Steel and this class " : per Maclean, C.J., in Rash Iron Co. v. Naylor ,* -Benson fy Co. (1884) Bcltary Shaha v. Nrlttya 6 opal Nundy 9 App. Ca. 434. "These cases were (1906) 33 Cal. 477, at p. 481. determined after the passing of the Indian (>} L. R. 9 C. P. 213, 214; and see Contract Act, but the views of the learned Pollock on Contract, 259, 272. judges are useful guides in determining THE INDIAN CONTRACT ACT. S. 39. In Sooltan Chund v. Schiller (y) the defendants agreed to deliver to the plaintiffs 200 tons of linseed at a certain price in April and May, the terms as to payment being cash on delivery. Certain deliveries were made by the defendants between the 1st and 8th of May, and a sum of Ks. 1,000 was paid on account by the plaintiffs, which left a large balance due to the defendants in respect of linseed already delivered. This balance was not paid, and the defendants thereupon wrote to the plaintiffs cancelling the contract and refusing to make further deliveries under it. The plaintiffs answered expressing their willingness to pay on adjustment of a sum which they claimed for excess refraction and an. allowance for some empty bags. The defendants stated that they would make no further delivery, and the plaintiffs thereupon bought in other linseed and sued the defendants for damages for non-delivery of the remaining linseed. Upon these facts it was held, following Freeth v. Burr(z), that there was no refusal on the part of the plaintiffs to pay for the linseed delivered to them, as they were willing to pay the sum due as soon as their cross- claims were adjusted. As to illustration (b) to the section it was said : " That illustration is perhaps not a happy one, because it may lead, as I think it has led in this instance, to misapprehension. But the difference between that case and this is clear enough. The singer by wilfully absenting herself, though on one night only, did in fact refuse altogether to perform an integral and essential part of her contract. By doing so she put it out of her power to perform her contract in its entirety. But here the plaintiffs have never refused to perform any part of their contract. They were willing to pay the sum due as soon as their cross-claims were adjusted ; and their default consisted in not paying for the linseed on delivery " (a). It may be further observed, with regard to the illustrations, that it would be rash to extend them. In England it has been held that a singer engaged to perform in concerts as well as in operas who has agreed, amongst other things, to be in London six days before the beginning of his engagement, for the purpose of rehearsals, does not, merely by failing to be in London at the time so named, entitle the manager to put an end to the contract (V). Wrongful dismissal of an employee has, on the other hand, been held to determine not only the contract of service, but a term restraining the employee from carrying on the same business after its termination (66). In reading the illustrations to the Act, so far as they bear on questions of construction, it must be assumed that there are not (y) (1878) 4 Cal. 252. See also Simson (a) Per Garth, C.J., 4 Cal., at p. 256. v. Virayya (1886) 9 Mad. 359 ; and (V) Bettini v. Gye (1876) 1 Q. B. D. Volkart Bros. v. Rutna Velu Chetti (1894) 183, Finch, Sel. Ca. 742. 18 Mad. 63. (7>J) General Billposting Co. v. Atkin- (--) L. R. 9 C. P. 208. son [1909] A. C, 118. DISABILITY TO PERFORM CONTRACT. 219 any terms beyond those stated ; the agreements met with in practice will almost always contain special terms, which must be considered. The principles set forth above were recently applied by the High Court of Calcutta in a case where the plaintiff had agreed to purchase from the defendant 300 tons of sugar, "the shipment [to] be made during September and October next in lots of about 75 tons in a shipment," the terms as to payment being cash before delivery. Notice of the arrival of the September shipment was given to the plaintiff, and he was called upon to pay before delivery. The plaintiff was unable to pay, and asked for time, but the defendant would not give it, and ultimately wrote to the plaintiff stating that he had cancelled the contract. On the arrival of the October shipment the plaintiff tendered payment for the same, but the defendant refused to accept the money, saying that the contract had been cancelled. The plaintiff thereupon sued the defendant for damages for refusing to deliver the October shipment. It was held in accordance with the English authorities that mere failure on the part of the plaintiff to pay for and take delivery of the September shipment did not amount to "a refusal" to perform the contract within the meaning of this section so as to entitle the defendant to rescind the contract, and that it did not exonerate him from delivering the October shipment (c). "Disabled himself from performing." Disability due to the party's own fault must be distinguished from inability to perform a contract. See Specific Eelief Act, s. 14, as to the effect of inability of a party to perform the whole of his part of a contract. See also s. 24 of the same Act, which enacts, amongst other things, that specific performance of a contract cannot be enforced in favour of a person who has become " incapable " of performing any essential term of a contract that on his part remains to be performed. It is very old law that if a promisor disables himself from performance, even before the time for performance has arrived, it is equivalent to a breach (d). In a modern English case (e) the defendant promised the plaintiff, his intended wife, in consideration of the marriage which after- wards took place, to leave a certain house and land to her by will for her life. After the marriage he sold the property to a third person. The Court, having decided on the facts that there was a contract, held that the plaintiff was entitled to treat the defendant's conveyance to a stranger as an immediate breach and to sue for damages. In a Madras case, under the terms of a mortgage for Rs. 800, the mortgagee advanced Rs. 300 to the mortgagor and agreed to pay the balance to a prior mortgagee of the S. 39. (tf) Rasli Behary Shaha v. JVrittya Gopal Nundy (1906) 33 Cal. 477. (d) See 3 Encycl. Laws of England, 350 (548, 2nd ed.) ; Pollock on Contract, 428 ;Anson 318, llth ed. 00 Synge v. Synge [1894] 1 Q. B. 466, C. A. 220 THE INDIAN CONTRACT ACT. S. 39. same property. The mortgagee failed to pay the balance according to the agreement, and the prior mortgagee sued the mortgagor and recovered the debt by attachment and sale of the mortgagor's movable property. About eight years after the date of the mortgage the mortgagee sued the mortgagor for interest due under the mortgage on Rs. 300 only. It was held (/) that under the circumstances the mortgagor was entitled to rescind the mortgage under this section " on the ground that the mortgagee by acting in contra- vention of his agreement incapacitated himself from performing it in its entirety " (g ), and that he was not entitled to treat the original mortgage as still in force so as to enable him to sue for the interest alone. The Court, however, expressed the opinion that in putting an end to the mortgage the mortgagor was bound to give up the benefit he had received under the mort- gage and to pay back Rs. 300 with interest up to date of cancellation (li). "Without disputing 'the correctness or the substantial justice of the decision, one may be allowed to think that the application of the present section was somewhat forced. It was made by only one member of the Court. "Promisee may put an end to the contract." The common law rights of a promisee on refusal by the promisor to perform his promise were thus stated by Scotland, C.J., in a Madras case(*) decided in 1863, and the statement remains applicable under the Act : "If a vendor contract to deliver goods within a reasonable time, payment to be made on delivery, and before the lapse of that time, before the contract becomes absolute, he says to the purchaser, ' I will not deliver the goods,' the latter is not thereby immediately bound to treat the contract as broken, and bring his action. The contract is not necessarily broken by the notice. That notice is, as respects the right to enforce the contract, a perfect nullity, a mere expression of intention to break the contract, capable of being retracted until the expiration of the time for delivering the goods. It cannot be regarded as giving an immediate right of action, unless, of course, tne purchaser thereupon exercise his option to treat-trig" contract, as rescinded T when he m,g.y go into the market and supply himself with similargoods, and sue upon the contract .at oncejipr any damage then sustained. The law on this subject will be found in \Leigh v. Paterson (k) and Phillpotls v. Evans (I), the authority of which cases was upheld in Hochsler v. De la Tour''' 1 (m). (/) Sitbba Rau v. Deru Shetti (1894) 18 Mad. 126. G/) Per Muttusiinri Ayyar, J., at p. 127. (/<) Sees. 65, p. 278, post. (i) Mansuk Das v. Rangayya Chetti, 1 M. H. C. 162. (/O 8 Taunt. 540. l*l< fc''^' iC (0 5 M. & W. 475 ; 52 R. R. 802. It is difficult to understand how the learned Chief Justice supposed this case to anticipate the doctrine of Hocl'ster T. De la Tour, to which the judgment of Parke, B., is distinctly adverse ; but this is of only historical interest. (m) 2 E. & B. 678, 95 R. R. 747 ; and RIGHT TO RESCIND. The last-mentioned case is now generally treated as the leading one on "anticipatory breach of contract." The rule shortly indicated by this phrase is that on the promisor's repudiation of the contract, even before the time for performance has arrived, the promisee may at his option treat the repudiation as an immediate breach putting an end to the contract for the future and giving^the promisee a right of action for damages. It must be remembered that the option is entirely with the promisee. A few months before the Contract Act came into force the effects of " anticipatory breach " were thus summed up in the Exchequer Chamber in England (ti) : "The promisee, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non- performance : but in that case he keeps the contract alive for the benefit of the other party as well as his own ;" he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudia- tion of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it. " On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it ; and in such action he will be entitled to such damages as would have arisen from the non- performance of the contract at the appointed time, subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss." It may be worth while to add that an unsuccessful attempt to perform a contract which does not disable the promisor from still performing it effectually within the time limited, or a reasonable time, and does not cause any damage to the promisee, cannot be treated as a refusal. Such an attempt does not of itself affect the legal rights of the parties at all (0). 221 S. 39. see Ripley v. McClure (1849) 4 Ex. 345, 359, 80 E. R. 593, 604. The rule in Hochster v. De la Tour is now generally received in America, and has been approved and applied by the Supreme Court of the United States : Roehm v. Horgt (1900) 178 U. S. 1. O) Frost v. Knight (1872) L. R. 7 Ex. 111. The judgment delivered by Cock- burn, C.J., is practically, though not formally, the judgment of the Court ; see at p. 118. The actual points decided were that the rule applies to contingent promises, and that the contract to marry is not excepted from it on any such grounds of its special character as were suggested in the Court below. See also Synge v. Syige (note (e), p. 219, above), where, however, it was not necessary to rely on the principle to its full extent. (<>) See Sorrowman v. Free (1878) 4 Q. B. Div. 500. THE INDIAN CONTRACT ACT. S. 39. The election of the plaintiff to treat repudiation of the contract as an immediate breach does not affect the measure of damages (see on s. 120, below). These authorities have been more lately followed in British India. Where, according to the custom of the caste to which the plaintiff and the defendant belonged, marriages ordinarily took place when the bride was between twelve and fifteen years of age, and the plaintiff, who was betrothed to the defendant's daughter, required the defendant to fix a date for his marriage within a certain period, after which the marriage could not take place for eighteen months, owing to the intervention of the Sinhasth year, and the girl would then have passed her fifteenth year, it was held that the declaration by the girl that she was unwilling to be married for three or four years, and by the father that he could not compel her to change her mind, was practically a repudiation of the contract of marriage, and entitled the plaintiff to damages for the breach (p). Contract of service. The illustrations to the section are both examples of contracts of service. In Hochster v. De la Tour (q) the defen- dant engaged the plaintiff as his courier on a Continental tour from June 1 for three months certain at 10 a month. Before that day came the defendant changed his mind and wrote to the plaintiff that he did not want him. The plaintiff, without waiting further and before June 1, sued the defendant for breach of contract. For the defendant it was argued that the plaintiff should have waited till June 1 before bringing his action, on the ground that the contract could not be considered to be broken till then. It was held, however, that the contract had been broken by express renunciation, and the plaintiff was not bound to wait until the day of performance. The principles enunciated in this case and the others underlying the present section were applied by the High Court of Bombay in a case where a station-master in the employ of a railway company, alleging that he had resigned the service of the company, claimed his share of the company's provident fund, but the claim was resisted by the company on the ground that he was dismissed from service, and that he was not therefore entitled, under the rules of the fund, to more than the amount of his subscriptions thereto. One of the questions was whether the notice of dismissal, having regard to the date on which it was given, operated as a dismissal of the plaintiff. The plaintiff had on February 14 gone on three months' leave without pay. On May 5 he tendered his resigna- tion to the defendant company. On May 13 the company wrote to the (p) Purshotamdas Trib/wcandas v. such cases see ib. p. 37, following Umed Purshotamdas Mangaldas (1897) 21 Bom. Kika v. Xagindas (1870) 7 B. H. C. 122. 23, 35. For the form of the decree in (j) (1853) 2 E. & B. 678, 95 R. K. 747. WHO SHOULD PERFORM CONTRACT. 223 defendant that he was dismissed from service. It was contended that there Ss. 39, 40. was no such dismissal as disentitled the plaintiff to his full share of the fund, first, because he had previously tendered his resignation, and, secondly, because the notice of dismissal was given on May 13, that is, before he became liable to resume his duties, which was on the 14th. Both these contentions were overruled. As to the first contention it was said that, there being no contract between the parties that the service should terminate on resignation, the resignation did not operate to determine the contract unless it was assented to by the other side. As to the other contention it was said : " His (plaintiff's) letter of the 5th day of May was an intimation of his intention not to perform the services to which he was bound. . . . The company only took him at his word . . . and it seems to me that there was on the 13th an anticipatory breach which in the events entitled them to determine the contract by dismissing the plaintiff" (r). Insolvency of promisor. This is not of itself equivalent to a total refusal to perform the contract, though it may be accompanied by conduct which amounts to a notice of the insolvent debtor's or his representative's intention not to pay his debts or perform his contracts. A seller, however, is not bound to go on delivering goods to an insolvent buyer (s). The proofs and illustrations belong to the special subject of Sale of Goods, and will be found collected under s. 97, below. By ivhom Contracts must be Performed. 40. If it appears from the nature of the case that it was the intention of the parties to any con- Person by whom promise is to be tract that any promise contained in it should performed. -111 be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it. . Illustrations. (a) A. promises to pay B. a sum of money. A. may perform this promise, either by personally paying the money to B. or by causing it to be paid to B. by another ; and, if A. dies before the time (r) Ganesh Ramchandra v. G. I. P. the plaintiff had said " I shall not return Ry. Co. (1900) 2 Bom. L. R. 790. This to your service, whether you accept my appears a strange decision, for if the resignation or not. " resignation was inoperative there was no (*) Ex part e Clmlmers (1873) L. R. 8 breach at all. There might have been if Ch. 289. 224 THE INDIAN CONTRACT ACT. S. 40. 'appointed for payment, his representatives must perform the promise, or employ some proper person to do so. (b) A. promises to paint a picture for B. A. must perform this promise personally. Personal contracts. Contracts involving the exercise of personal skill and taste, or otherwise founded on special personal confidence between the parties, cannot be performed by deputy. But it is not always easy to say whether a particular contract is, in this sense, personal or not, or what is an adequate performance of a personal contract. The hiring of a carriage from Sharpe, a coachmaker trading under his own name alone, but in fact with a partner, was held to be a personal contract, which the hirer was not bound to go on with after Sharpe had retired from business. " He may have been induced to enter into the contract by reason of the confidence he reposed in Sharpe, and at all events had a right to his services in the execution of it." (/). .This has been considered an extreme application of the principle (u), which ought to be applied only where the contract really and substantially has relation to the personal conduct of the contracting party (). A contract for personal agency or other service entered into with partners is generally determined by the death of a partner, or it may be more accurate to say that it is not held to continue with the surviving partner unless there is something to show a distinct intention to that effect (y). On the other hand, a contract with a firm which has nothing really personal about it so far as regards the partners, for example a contract to perform at a music-hall belonging to the firm, is not generally determined by the death of one member of the firm, especially if the individual members of the firm were not named in the contract and not known to the other party (0). Every case must really be judged on its own circumstances. The illustrations to the section look obvious enough. But the second is not quite so simple as it looks. Suppose A. is not a painter, but a sculptor. Must A. chisel the whole of his statue in the marble with his own hand, or, if the statue is to be in bronze, must he cast it himself ? According to all modern usage, he is clearly not bound to do so ; he is (t) Robson v. Dr-ummond (1831) 2 B. [1901] 1 K. B. 59. The defendants were & Ad. 303, 3o E. R. 569, 572. undisclosed partners trading under a (u) British Waggon Co. v. Lea $ Co. quasi-corporate name ; the plaintiffs were (1880) 1 Q. B. D. 149, 152. a troupe of performers, but nothing turns (x) Phillips v. Alhambra Palace Co. on their number. If one of the plaintiffs [1901] 1 K. B. 59. had died the case would have been (y) Tasker v. Shepherd (1861) 6 H. & different, as they had undertaken active N. 575. and personal performances. (-) Phillipy v. Allutnibra Palace Co. WHO SHOULD PERFORM CONTRACT. 225 expected to design and supervise the work, but the manual execution will be Ss. 40 42 . done, subject to the master's final touches, by skilled workmen. Benvenuto Cellini cast his own Perseus ; Mr. Thornycroft did not cast his own King Alfred. Again, A. is a painter commissioned to carry out a great mural decoration. Must he actually hold the brush that lays on every square inch of paint ? Certainly that was not the understanding of the great European painters of the sixteenth and seventeenth centuries and their patrons ; the less important parts of the work were executed by pupils and assistants under the master's direction, and it would have been impossible to get the work done otherwise. Still the master was bound to perform his promise personally in the sense that he could not delegate the design or general supervision to a junior. In ascertaining what is contemplated by the parties, usage as well as the express terms must be regarded. Ordinary contracts for delivery of goods, payment for them and the like, may of course be performed by deputy (a). " There is clearly no personal element in the payment of the price " (#). See notes under the same head to s. 37, pp. 202 209, above. 41. When a promisee accepts performance of the Effect of accept- promise from a third person, he cannot after- ing performance T e i_ j. i from third person, wards enforce it against the promisor. There is English authority to the effect that discharge of a contract by a third person is effectual only if authorised or ratified by the debtor; but it is not clear that the better modern opinion is not the other way (c). In India there is no occasion to discuss the point, as the words of the Act leave no room for doubt. Op. the Negotiable Instruments Act, 1881, s. 113. 42, When two or more persons have made a joint Devolution of promise, then, unless a contrary intention joint liabilities. appears by the contract, all such persons, during their joint lives, and after the death of any of them, his representative jointly with the survivor or survivors, and after the death of the last survivor, the representatives of all jointly, must fulfil the promise. This is a deliberate variation of the Common Law rule. In England " upon the death of one of several joint contractors the legal liability under () Tod v. Lakhmidas (1892) 16 Bom. Cement Manufacturers [1902] 2 K. B. 441, 451 ; but authority is really needless, 660, 672, per Collins, M.R. even if illustration (a) did not cover it. (c) See Leake, 647, 648, 5th ed. ; Pol- (&) Tolhurst v. Associated Portland lock, 470. i.e. 15 226 THE INDIAN CONTRACT ACT. Ss. 42, 43. the contract devolves on the survivors ; and the representative of the deceased cannot be sued at law either alone or jointly with the survivors. Consequently the whole legal liability ultimately devolves upon the last surviving contractor, and after his death upon his representatives " (d). Limited exceptions have been introduced by Courts of Equity, and in particular a deceased partner's estate is liable, subject to the prior payment of his separate debts, for the unsatisfied debts of the firm (e). Parties can, of course, make their contracts what they please ; but the presumption established for British India by the present section appears to be more in accordance with modern mercantile usage. 43, When two or more persons make a joint promise, AU one of "oint the Promisee may, in the absence of express promisors may be agreement to the contrary, compel any one or compelled to per- form, more (/) of such joint promisors to perform the whole of the promise. Each of two or more joint promisors may compel every other joint promisor to contribute Each promisor i i -IF , i < < may compel con- equally with himselt to tne performance ot tribution. , , . , .... the promise, unless a contrary intention appears from the contract. If any one of two or more joint promisors makes default in such contribution, the remaining joint Sharing of loss . by default in con- promisors must bear the loss arising from such tribution. n . . . , , default in equal snares. Explanation. Nothing in this section shall prevent a surety from recovering from his- principal payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal. Illustrations. (a) A., B., and C. jointly promise to pay D. 3,000 rupees. D. may compel either A. or B. or 0. to pay Mm 3,000 rupees. (Y7) Leake, 298. generally supposed to be joint and several (e) Partnership Act, 1890, s. 9, follow- for all purposes. ing the decision of the House of Lords in (/) The words " or more " have been Kendall v. Hamilton (1879) 4 App. Ca. inserted by the Repealing and Amending 504,. before which partnership debts were Act (XII of 1891). JOINT PROMISORS. 227 (b) A., B., and C. jointly promise to pay D. the sum of 3,000 S. 43. rupees. C. is compelled to pay the whole. A. is insolvent, but his assets are sufficient to pay one-half of his debts. 0. is entitled to receive 500 rupees from A.'s estate, and 1,250 rupees from B. (c) A., B., and C. are under a joint promise to pay D. 3,000 rupees. 0. is unable to pay anything, and A. is compelled to pay the whole. A. is entitled to receive 1,500 rupees from B. (d) A., B., and 0. are under a joint promise to pay D. 3,000 rupees, A. and B. being only sureties for 0. 0. fails to pay. A. and B. are compelled to pay the whole sum. They are entitled to recover it from 0. Joint promisors. The series of sections now before ns materially varies the rules of the Common Law as to the devolution of the benefit of and liability on joint contracts (g). As far as the liability under a contract is concerned, it appears to make all joint contracts joint and several (Ji). It allows a promisee to sue such one or more of several joint promisors as he chooses, and excludes the right of a joint promisor to be sued along with his co-partners ('). There is still considerable difference of opinion in the Indian High Courts as to its consequential operation where a judgment has been obtained against some or one of joint promisors, and the decisions must be 'examined. We think it the better opinion that the enactment should be carried out to its natural consequences, and that, notwithstanding the English authorities founded on a different substan- tive rule, such a judgment, remaining unsatisfied, ought not, in British India, to be held a bar to a subsequent action against the other promisor or promisors. Effect of decree against some only of joint promisors. In Hemendro Coomar Mullick v. Rajendrolall Moonshee (j ), it was held by the High Court of Calcutta, following the rule laid down in King v. Hoare (&), that a decree obtained against one of several joint makers of a promissory note is a bar to a subsequent suit against others. This was followed by the High Court of Madras in a similar case in Gursami CMti v. Samurti Chinna (Z). But these decisions were dissented from by Strachey, C.J., in Muhammad Askari v. Radhe Ram Singh (m}. In that case the question was whether a judgment obtained against some of several mortgagors and (//) Lultmidas Kliimjl v. Purshotam Singh (1900) 22 All. 307, 315 ; Dick v. Jft/riiJas (1882) 6 Bom. 700, 701. Dhuiiji Jaltlut (11)01) 25 Bom. 378, 380. (//) MotUnl Jieclianldxx v. GhellaWuti (,/ ) (1878) 3 Cal. 353. ITuri m m (1892) 17 Bom. 0, 11. (It) (1844) 13 M. & W. 494; 67 II. 11. (/) Ilcincndro Coomar Mullick v. 694. Rajendrolall Moonshee (1878) 3 Cal. 353, (0 (1881) 5 Mad. 37. 360 ; Muhammad Askari v. lladhe Earn (/) (1900) 22 All. 307. 152 IB THE INDIAN CONTRACT ACT. S. 43. remaining unsatisfied against them was a bar to a second suit against other joint mortgagors, and the Court held that it did not constitute any bar and that a second suit was maintainable, the doctrine of King v. Hoare (ri) not being applicable in India, at all events in the Mufassal, since the passing of the Indian Contract Act. Strachey, C.J.,said : " My objections to the application of the doctrine are based on purely legal grounds. The doctrine now rests not so much on King v. Hoare (1844) 13 M. & W. 494, as on the judgments of the law lords in Kendall v. Hamilton (1879) 4 App. Ca. 504. As explained in those judgments, the doctrine that there is in the case of a joint contract a single cause of action which can only be once sued on is essentially based on the right of joint debtors in England to have all their co- contractors joined as defendants in any suit to enforce the joint obligation. That right was in England enforceable before the Judicature Acts by means of a plea in abatement, and since the Judicature Acts by an application for joinder which is determined on the same principles as those on which the plea in abatement would formerly have been dealt with. In India that right of joint debtors has been expressly excluded by s. 43 of the Contract Act, and therefore, the basis of the doctrine being absent, the doctrine itself is inapplicable. Cessante ratione legis, cessat ipsa lex" The reasoning of Strachey, C.J., seems to us conclusive ; but until it has been adopted by the other High Courts or confirmed by the Judicial . Committee of the Privy Council the point must be regarded as open. Coming next to the High Court of Bombay, the doctrine of King v. Hoare was assumed to be applicable to India by that Court in Lukmidas Khimji v. Piirshotam Haridas (0), and in Laksmishankar v. Vishnuram (p). In the latter case it was held that the principle of King v. Hoare did not apply to the facts of the case, as the decree in the first suit against one of the partners, which was set up as a bar to a subsequent suit against allK the partners, was made by the Civil Court of Baroda, which had no jurisdiction over some of the partners who resided in British territory. The applicability to India of the rule in King v. Hoare was again con- sidered by the same Court in Dick v. Dhunji JaittM (q), but the point was not decided, as the Court thought it did not arise directly for decision. Judgment against one joint promisor who admits claim after institu- tion of suit does not bar the suit against other joint promisors. In the last- mentioned case the plaintiff sued the defendants, alleging that they () (1844) 13 M. & W. 494 ; 67 K. K. (p) (1899) 24 Bom. 77. 694. (0) (1901) 25 Bom. 378. 00 (1882) 6 Bom. 700. JOINT PROMISORS. 229 were partners, and at the hearing one of the defendants admitted the S. 43. plaintiff's claim, and judgment was thereupon passed against him for the amount claimed. On behalf of the other defendants it was contended that, the cause of action alleged in the plaint being joint, it merged in the judgment recovered against the first defendant, and that further proceedings in the suit were therefore barred. The Court did not accede to this contention, and it was held that the judgment recovered against the first defendant did not bar further prosecution of the suit against the others. Reference was made in the course of the judgment to s. 153 of the Code of Civil Procedure, 1882 (now 0. 15, r. 2, Code of Civil Procedure, 1908). As to King v. Hoare, it was stated that the rule there laid down did not apply to the facts of the case under consideration. Suit against one of several partners. In Lukmidas Khimji v. Purshotam Haridas (r) it was held in a suit brought upon a contract made by a partnership firm that a plaintiff may select as defendants those partners of the firm against whom he wishes to proceed. This decision was cited with approval by Farran, C.J., in Molilal Bechardass v. Ohellabhai Hariram (s), and was followed by the High Court of Madras in Narayana Chetti v. Lakshmana Chetti(t}, where it was held in a similar case that according to the law declared in s. 43 of the Contract Act, especially when taken with s. 29 of the Code of Civil Procedure (u), it is not incumbent on a person dealing with partners to make them all defendants, and that he is at liberty to sue any one partner as he may choose. It will be noted in this case that the Court expressly applied to partners not only s. 43 of the Contract Act, but also s. 29 of the Code of Civil Procedure, which relates not to joiut, but to several and to joint (r) (1882) 6 Bom. 700. 307, 315. , (s) (1892) 17 Bom. 6, 11. In that case (u) S. 29 of the Code of Civil Procedure, Farran, C.J., observed that ss. 42, 43, and 1882 (now 0. 1, r. 6, in the Code of 45 related to partners as well as to other 1908) runs as follows : " The plaintiff may, co-contractors, and that if the Legislature at his option, join as parties to the same had intended to except partners from the suit all or any of the persons severally or provisions of this section it would have jointly and severally liable on any one done so in express words. See, however, contract, including parties to bills of ex- Lalismislianliar v. Vishnuram (1899) 24 change, hnndis, and promissory notes." Bom. 77, where the Court held, without The judgment seems to assume that the any reference to the earlier case, that the effect of s. 43 was to make all joint con- liability of partners was joint, and that tracts joint and several. See Motilal no one partner could change it into a Becliarda&s v. GhellaWtai Ilarlntm joint and several liability without the (1892) 17 Bom. G, 11 ; and Muhammad consent of the other partners. Askari v. Radlte Ram, Singh (1900) 22 (0 (1897) 21 Mad. 256. See also (1878) All. 307, 316. 3 Cal. 353, 359, 360, and (1900) 22 All. 10 THE INDIAN CONTRACT ACT. S. 43. and several, liability. The same view of the section has been taken by the Punjab Chief Court (y). In this connection may be noted 0. 1, r. 10, of the Code of Civil Proce- dure, which provides that the Court may order, either of its own motion or on the application of a party to a suit, " that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions in the suit, be added." The effect of s. 43 being, according to the above decisions, to render the liability of joint promisors joint and several and to exclude the right of a joint contractor to be sued along with his co-contractors, the provisions of 0. 1, r. 6, are applicable to the case, and the promisee is at liberty to sue any one or more of the joint promisors. But this right is distinct from, and does not affect, the right of a defendant to apply to the Court under 0. 1, r. 10, of the Code to have his co- contractor added as a party. But such an application, it is conceived, can be sustained not on the ground that the joint contractor " ought to have been joined " as defendant, but only under the latter branch of the section, if the Court considers it necessary to do so (z). (/) Jag Lai v. S/tib Lai (1902) Punj. Rec. no. 37 ; Thomas Beck v. Thomas Slddle (1892) Punj. Kec. no. 11. (.r) Note the observations of Strachey, C.J., in Muhammad Asltari v. liadfte Ram Singh (1900) 22 All. 307, 316, 317 : " In their note to s. 43, Messrs. Cunningham and Shephard, at pp. 158, 159, of their commentary on the Indian Contract Act, 7th ed., say that, 'if this section is intended to deny to joint debtors the right to be sued jointly in one suit, it involves a departure from English law,' and that, ' in view of this section and the 29th section of the Code of Civil Pro- cedure, it is clear that the non-joinder of a co-debtor is no ground of defence to a suit ; but it is apprehended that an application made under the 32nd section of the Code to add as a defendant an omitted co-debtor would be dealt with in the same manner as it is in England.' I cannot agree with this view. As the judgments in Kendall \. Hamilton, (1879) L. R. 4 A. C. 504, show, such an applica- tion would in England be dealt with in the same manner as the old plea in abatement, and the effect of the latest decisions is that a joint debtor, though he has not an absolute, has an ordinary and aprimdfacie, right to have his co-debtors joined : Wilson, Sons $ Co. v. Balcarres Brook Steamsli'q) Co. [1893] 1 Q. B. 422 ; RolinsoH v. Geisel [1894] 2 Q. B. 685." Note also the observations of Crowe, J., in Dick v. Dhunji Jaltlia (1901) 25 Bom. 378, 386, where the learned Judge says : "With regard to the argument based on the provisions of s. 43 of the Contract Act, it seems to me that that section merely takes away the right of a joint debtor to be sued jointly and to plead in abatement a right which was abolished in England by the Judicature Acts. It is still open to a defendant to apply to the Court for joinder of a person who ought to have been included in the action ; and, to use the words of Earl Cairns, L.C., in Kendall v. IfumUton (1879) 4 App. Ca. 504, ' the application to have a person so JOINT PROMISORS I CONTRIBUTION. 231 Contribution between joint promisors. This clause represents the S. 43. doctrine of English equity as distinct from that of the Common Law Courts. It would be useless to cite English authorities. The liability is only to contribute to the performance of the promise. Heuce if one of several persons jointly liable for a debt is sued, and is compelled to satisfy the debt and the costs of the suit, he can only call on the others to contribute in respect of the debt, and not in respect of the costs (y). When liability to contribute arises. In a case decided before the enactment of the Contract Act, it was held that the mere existence of a decree against one of several joint debtors does not afford ground for a suit for contribution against the other debtors. " Until he has discharged that which he says ought to be treated as a common burden, or at any rate done something towards the discharge of it, he cannot say that there is anything of which he has relieved his co-debtors, and which he can call upon them to share with him " (z). And the law under the Contract Act would appear to be the same (see illustrations to the section). Contribution as between judgment debtors. The question as to whether, as between persons against whom a joint decree has been passed, there is any right of contribution at all depends upon the question whether the defendants in the former suit were wrong-doers in the sense that they knew or ought to have known that they were doing an illegal or wrongful act. In that case no suit for contribution will lie(). Thus where a decree for costs against two defendants jointly was executed against one of them, who had set up a false defence in the suit in collusion with the omitted included as a defendant ought to and to be reasonably inferred from its be granted or refused on the same language. principles on which a plea in abatement (y) Punjab v. Petum Singh (1874) 6 would have succeeded or failed.' S. 32 N.-W. P. 192. of the Civil Procedure Code gives the (z) Ram Pershad Singh v. Neerbhoy Court absolute discretion, either on appli- Singh (1872) 11 B. L. K. 76. cation or suo motit, to dismiss or add () Suput Singh v. Imrit Tewari (1880) parties." 5 Cal. 720, citing Merryioeather v. Nixan The opinion expressed by Mr. Justice C1799) 8 T. R. 186 ; 16 R. R. 810 ; 1 Sm. Crowe corresponds to a considerable L. C. 383, 10th ed. (The real leading extent with that of Messrs. Cunningham case is, however, Adamsonv. Jan-is (1827) and Shephard. We agree with Strachey, 4 Bing. 66, 29 R. R. 503. Bee [1894] C.J., in thinking that an application A. C. at p. 324.) Hari Saran Maitra v. under 0. 1, r. 10, to add as defen- Jotindra Mohan Lahiri (1900) 5 C. W.N. dant an omitted debtor should not be 393 ; Mohesh Chandra v. Soydya Nath dealt with as in England, but on the (1901) 6 C. W. N. 88 ; Krishna Rum v. principles expressed in the Contract Act Rakmini Sewak Singh (1887) 9 All. 221. 232 THE INDIAN CONTRACT ACT. Ss, 43, 44. other, and the former sued the latter for contribution, it was held that the suit would not lie(J). In a recent case(e) the High Court of Madras considered it an open question how far the rule in Merry iv father v. Nixan (cl), which lays down that there is no contribution between joint tortfeasors, was applicable to India, having regard to the observations of Lord Herschell in Palmer v. Wick, etc., Steam Shipping Co. (e), where the noble lord said that the rule did not appear to him " to be founded on any principle of justice or equity or even of public policy which justifies its extension to the jurisprudence of other countries." 44, Where two or more persons have made a joint promise, a release of one of such joint Effect of release J . of one joint pro- promisors by the promisee does not dis- misor. . . . . . charge the other joint promisor or joint pro- misors ; neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors. "We have here another variation of English law. In England the releasing creditor must expressly reserve his rights against the co-debtors if he wishes to preserve them (/ ). This section applies equally to a release given before or after breach. Thus where in a suit ( g ) f or damages against several partners the plaintiff compromised the suit with one of them, and undertook to withdraw the suit as against him, it was held that the release did not discharge the other partners, and the suit might proceed as against them. For the latter it was contended that the section occurred in the portion of the Act relating to the performance of contracts, and that it did not therefore apply to (i) Vayangara v. Parly angot (1883) 7 the rest. Mad. 89; Sndhu Singh v. Lehna Singh (c) Siva Panda v. Jujtusti Panda (1Q02) (1901) Punj. Rec. no. 7 ; GoUnd Cylinder 25 Mad. 599. v. Srigo-Und (1897) 24 Cal. 330. See also (rf) See note (a), above, as to contribution between judgment (e) [1894] A. C. 318, 324. debtors Brqjendro Kumar Roy v. Jfaafi (/) There is no different equitable Seharl Roy (1886) 13 Cal. 300, and doctrine. In Ex parts Good, (1877)5 Ch. LaTtshmana Ayyan v. Rangasami Ayyan Div. 46, the document in question was (1894) 17 Mad. 78, where it was held upon held not to be a release at all, and the the facts of the case that one judgment general rule not disputed ; see at p. 57. debtor against whom execution had been (0) -K'irfee Cltunder v. Struthers (1878) levied was entitled to contribution against 4 Cal. 336. JOINT PROMISEES. 233 liabilities arising out of the breach of a contract. The Court held that S. 45. such a construction of the section was too narrow. 45. When a person has made a promise to two or Devolution of rnore persons jointly, then, unless a contrary joint rights. intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of such deceased person jointly with the survivor or survivors, and, after the death of the last survivor, with the representatives of all jointly. Illustration. A., in consideration of c,000 rupees lent to him by B. and 0., promises B. and C. jointly to repay them that sum with interest on a day specified. B. dies. The right to claim performance rests with B.'s representative jointly with C. during C.'s life, and after the death of C. with the representatives of B. and 0. jointly. Promise to two or more persons jointly. This section applies to all joint promisees whether- they be partners (A), co-sharers (*'), or members of a joint Hindu family carrying on business in partnership (K). There is nothing in this enactment to show what happens to a single right when the owner of it dies, and several persons become entitled to it (I). In such a case, it has been held that all of them must join in a suit to enforce the right, and if any of them refuses to join as plaintiff, he must be added as a defendant (m). Right to performance of promises during joint lives. As the right to claim performance of a promise in the case of joint promisees rests with them all during their joint lives, it follows that all the joint promisees should sue upon the promise (ri). If a suit is, therefore, (/<) Motilal v. Gliellabliai (1892) 17 (1894) 18 Mad. 33. Bom. 6, 13 ; Ago, Gulam Ilusain \. A. D. (I) Kandhiija Lai \. Chaiular (1884) Sasoon (1897) 21 Bom. 412, 421. 7 All. 313, 322. (i) Ballirislma v. The Municipality of (t) Ib. ; Ahinsa Hibl v. AM id Kader MaJiad (1885) 10 Bom. 32 ; Bamltriskna (1902) 25 Mad. 26, 35 ; Mahamed Ishaq v. Eamabai (1892) 17 Bom. 29. v. Sheikh Akramul Jfioj (1908) 12 (k) Ilamxelult v. Ramlatt Komidoo C. W. N. 84, 86, 93. (1881) 6 Cal. 815; Kali&as v. Nathu (n) Dular Chanel v.Balram Das (1877) Mat/van (1883) 7 Bom. 217 ; Ram. 1 All. 453 ; Jowala Nath v. Rupa (1882) Naraln v. Ham, Cliunder (1890) 18 Cal. Puuj. Rec. no. 175. But if a contract is 86 ; Alagappa Chetti v. VelUan Chetti entered into with one partner only it is 234 THE INDIAN CONTRACT ACT. S. 45. brought by some of them only, and the other promisees are subse- quently added as plaintiffs, whether on objection taken by the defen- dant (0) or by the Court of its own motion (p), the whole suit will be dismissed if it is at that time barred by limitation as regards the other promisees. In this connection we may note the provisions of the Code of Civil Procedure, 1908, 0. 30, r. 4, which are as follows : " (1) Notwithstanding anything contained in section 45 of the Indian Contract Act, 1872, where two or more persons may sue or be sued in the name of a firm under the foregoing provisions and any of such persons dies, whether before the institution or during the pendency of any suit, it shall not be necessary to join the legal representative of the deceased as a party to the suit. " (2) Nothing in sub-rule (1) shall limit or otherwise affect any right which the legal representative of the deceased may have (a) to apply to be made a party to the suit, or (b) to enforce any claim against the survivor or survivors." Validity of discharge by one of several joint promisees. It has been held by the Madras High Court that this section does not make it incumbent on the debtor to satisfy all the joint promisees before obtaining a complete discharge. A release, therefore, of a mortgagor by one of two mortgagees on payment to him of the mortgage debt discharges the mortgagor from all liability under the mortgage to the other mortgagee (q). This decision is based upon the English case of Wallace v. Kelsall (;) and the last paragraph of s. 38, which provides that "an offer to one of several joint promisees has the same legal consequences as an offer to all of them." The authority of this decision is considerably shaken by the later decision of the Chancery Division in Poivell v. Brodhurst (s). But the principle of the Madras case is inapplicable to the case of co-heirs who are not joint promisees, but the heirs of a single promisee, and a release, therefore, of the mortgagor by one of the heirs of the deceased mortgagee on payment to him of the amount due under the mortgage is not a valid competent for him to maintain a suit by (1897) 21 Bom. 580. himself without making his partners co- (/;) Imam-vd-din v. Llladliar (1892) plaintiffs : Me/it- Slnyh v. Chela Ram 14 All. 524 ; Ram Klnkar v. AMU (1906) Punj. Rec. no. 127. See Ahinsa Chandra (19U8) 35 Cal. 519. Bill \. Abdul Aflde;- (1902) 25 Mad. 26 ; (if) Barter Maran v. Ramana (1897) Imam-ud-Din v. Liladhar (1892) All. 20 Mad. 461. W. N. 104. (r) (1840) 7 M. & W. 264 ; 56 R. R. (0) RamxebuTtv. Ramlall Kundoo (1881) 707. 6 Cal. 815; Kalldas v. Nathu Bhagvan (*) [1901] 2 Ch. 160; Ahinsa Bili v. (1883) 7 Bom. 217 ; Fatmalal v. Pirlhal Aid id Kader (1901) 25 Mad. 26, 39 ; SUIT BY SURVIVING PARTNER. 235 discharge to the mortgagor (). Where a debt due to a joint Hindu S. 45. family stands in the name of one member, he is prima facie entitled to realise it, and a payment made to him is a valid discharge of the debt (V). The same rule holds even where the debt is family property. In such a case a payment made to any other member of the family does not operate as a discharge, unless there be circumstances justifying the payment (c). Suit by a surviving partner. The general rule of English law is (contrary to the present section) that joint contracts are enforceable by the survivors or survivor alone. There is an equitable exception, founded on mercantile custom, as to debts due to partners ; but even in this case, " although the right of the deceased partner devolves on his executor, . . . the remedy survives to his co-partner, who alone must enforce the right by action, and will be liable on recovery to account to the executor or administrator for the share of the deceased" (d). The present section extends the mercantile rule of substantive right to all cases of joint con- tracts. But it does not follow that it was intended to alter the rules of procedure in cases where the mercantile rule of substance was already admitted. It seems therefore to be the better opinion that the representa- tives of a deceased partner are not necessary parties to a suit for the recovery of a debt which accrues due to the partnership in the lifetime of the deceased (e). It has been so laid down by the High Courts of Allahabad, Bombay, and Madras ; but the contrary has been maintained by the Calcutta High Court (/). English law and the alteration of it by the Act were discussed, and the difficulty occasioned by the words " as between him and them " in connection with this point was considered by Farran, J., in Motilal v. GhellaWiai (g}. The learned Judge there stated, " It is difficult to give these words their full effect if the surviving contractors in the case of partners are allowed to sue alone. The right to performance of the contract as far as the other contracting party is concerned rests just as much with the representative Situ rum v. ShridJtar (1903) 27 Bom. (e) GoUnd Prasad v. Cliandar Sekhar 292, 294. (1887) 9 All. 486 ; Motilal v. GJiellabhai (n) Sitai-eint v. SJu -id/tar (1903)27 Horn. (1892) 17 Bom. 6 ; Vaidyanatha Ayi/ar 292. v. Chintiasami Naik (1893) 17 Mad. 108 ; (li) Ramanami Chctti v. Manihlta Debi Das v. Nirpat (1898) 20 All, 365 ; Mud ali (1899) 9 Mad. L. J. 155. Mulli Raj v. George Knight (1906) Punj. (r) Adaikkalain Chetti v. MariututJtu Rec. no. 10. (1899) 22 Mad. 326. (/) Ram Narain v. Ram Chundcr (d) Williams on Executors, 10th ed. (1890) 18 Cal. 86. (1905), p. 638 ; 9th ed., pp. 733, 734. (3} (1892) 17 Bom. 6, 14. 236 THE INDIAN CONTRACT ACT. S. 45. of the deceased partner as with the surviving partner. Can the latter then sue without joining the former as a party to the suit ? Logical consistency points to an answer in the negative. The case of partners is, however, as we have shown, anomalous, and we think that, as the Legislature has not enacted that the representatives of a deceased partner must join in suing in a partnership contract jointly with the sur- viving partners, we are not wrong in holding that, notwithstanding the provisions of the Contract Act, the old practice of the Small Causes Court need not be changed." The case is not literally covered by s. 263, but it may be held that a contrary intention within the meaning of the present section sufficiently appears from the nature of the transaction when it is once ascertained to be a partnership transaction, regard being had to the uniform and well- understood course of practice. With regard to the supposed anomaly, it disappears when we remember that in mercantile usage the firm is regarded as a person distinct from the individual partners so long as the partnership exists and is not fully wound up ; and this view is now to a certain extent recognised in English procedure by allowing actions to be brought by and against partners in the name of the firm (h). Very much the same procedure has been intro- duced by the Code of Civil Procedure, 1908 (*). In so far as the firm is treated like a person, the executors of a deceased partner are no more appropriate parties to the recovery of a partnership debt than the executors of a deceased shareholder to the recovery of a debt due to an incorporated company. Suit by representative of deceased partner. The representative of the estate of a deceased partner may maintain a suit for the recovery of a partnership debt, and may join the surviving partners as defendants in the suit where they refuse to join as plaintiffs (k). Right of performance of representative jointly with survivor. "Where, by the terms of a mortgage, interest was payable by the mortagor to two mortgagees jointly, it was held that upon the death of one of the mortgagees his legal representative was entitled to a moiety of the interest due under the mortgage (/). Survivorship in case of Government securities. The Indian Securities Act XIII of 1886, s. f>, runs as follows : (A) Order XLVIII. A ; Pollock, Digest Sazoon (1897) 21 Bom. 412, 421. of Law of Partnership, 8th ed., p. 139. (I) Kanthu Punja v. Vittamma (1901) (0 See Order XXX. 25 Mad. 385. (A) Ago, Gvlant Husaln v. A. D. TIME FOR PERFORMANCE. 237 " 1. Notwithstanding anything in the Contract Act, 1872, s. 45, when a Govern- Ss. 45, 46. ment security is payable to two or more persons jointly, and either or any of them dies, the security shall be payable to the survivor or survivors of those persons. " 2. Nothing herein contained shall affect any claim which the representatives of the deceased person may have against the survivor or survivors in respect of the security jointly payable to him or them and the deceased. " 3. This section shall apply whether death of the person to whom the security was jointly payable occurred or occurs before or after this Act comes into force." Time and Place for Performance. 46, Where, by the contract, a promisor is to perform Time for perform- his promise without application by the promisee, and no time for performance is specified, the engagement must be performed specified. within a reasonable time. Explanation. The question "what is a reasonable time " is, in each particular case, a question of fact. " Engagement." The word "engagement" in this section is a survival from the language of the original draft, in which, for some reason not easy to understand, it is constantly used instead of " agreement " or " promise." Here it is synonymous with "promise." Reasonable time. It is also difficult to understand why decisions should be reported on the question of what is reasonable time, which is declared by the Act itself to be always a question of fact ; but, having been reported, they must be mentioned. Where the defendants agreed to supply coal to the plaintiffs from time to time, as required by the defendants, on reasonable notice given to them, it was held that a notice given by the plaintiffs on the 22nd July, 1898, for the supply of 2,648 tons of coal on or before 31st August, 1898, was not reasonable (m). Jenkins, C. J., said : " Perhaps it might have been physically possible for the defendants to carry out such an order, but it would clearly have required an effort which the plaintiffs had no right to demand. I do not think that a notice involving such an effort from business men with innumerable other matters to attend to can be held to be such a reasonable notice as was intended by both parties when this document was given." And where the defendant agreed to discharge a debt due by the plaintiff to a third party and in default to pay to the plaintiff such damages as he might sustain, and no time was fixed for the performance of the obligation, it was held O) The Boigal Coal Co., Ltd. v. Homee Wadia $ Co. (1899) 24 Bom. 97, 104. 238 THE INDIAN CONTRACT ACT. Ss. 46, 47. that the failure of the defendant to perform it for a period of three years amounted to a breach of the contract, as that was a sufficient and reasonable time for performance (n). Compare the Negotiable Instruments Act XXVI of 1881, s. 105, which runs as follows : "In determining what is a reasonable time for presentment for acceptance or payment, for giving notice of dishonour, and for noting, regard shall be had to the nature of the instrument and the usual course of dealing with respect to similar instruments ; and in calculating such time public holidays shall be excluded." 47 When a promise is to be performed on a certain Time and place day, and the promisor has undertaken to per- form it; without application by the promisee, tne P roimsor ma J perform it at any time made - during the usual hours of business on such day and at the place at which the promise ought to be performed. Illustration. A. promises to deliver goods at B.'s warehouse on the 1st January. On that day A. brings the goods to B.'s warehouse, but after the usual hour for closing it, and they are not received. A. has not performed his promise. Common Law rule. This section, with the illustration, simplifies the rule. According to the Common Law as laid down in the only modern case on the subject (0), the illustration would have run thus : " B. is not bound to be at the warehouse to receive the goods after the usual hours of business, and if he is not there A. has not performed his promise. If B. is there and could receive the goods before midnight, but refuses to do so, A. has performed his promise." There are some further minute distinctions in English law which it would be useless to cite here (p). The amendment made by this section is obviously in accordance with good sense, though the English rule is capable of a logical explanation. Delivery on Sunday. In a suit for damages against the defendant, a German, for non-delivery of goods, it was contended that he was not bound to deliver the goods on Sunday, which was the last day named in the contract for performance. It was held that the " Lord's Day () Doraxiiiyti v. Aninachalam (1899) Man. & G. 593, 64 E. E. 810. 23 Mad. 441. O) They are stated in Leake, 6U5 (o) Startup v. Macdotiald (1843) 6 608. PLACE FOR PERFORMANCE. 239 Act " did not apply to India, at any rate not to the defendant, who was a 7 ~ 49> German, and that, in the absence of a custom to the contrary, he was bound to deliver the goods on that day if they had not already been delivered (#). 48. When a promise is to be performed on a certain day, and the promisor has not undertaken to Application for performance on perform it without application by the promisee, certain day to be at . . . proper time and it is the duty of the promisee to apply tor performance at a proper place and within the usual hours of business. Explanation. The question " what is a proper time and place " is, in each particular case, a question of fact. The proper place will, of course, be the place named in the contract, if any. Where more than one place is named, " it is for the person to whom payment is to be made to fix the place at which he will be paid ; until he has selected the place at which he will be paid there can be no default." The English decision from which we quote would presumably be followed here (r). 49, When a promise is to be performed without application by the promisee, and no place is Place for per- L \ formance of pro- fixed for the performance of it, it is the duty mise where no application to be of the promisor to apply to the promisee to made and no place . tixed for perform- appoint a reasonable place tor the pertorm- ance of the promise, and to perform it at such place (s). Illustration. A. undertakes to deliver a thousand maunds of jute to B. on a fixed day. A. must apply to B. to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at such place. Rule of Common Law. In the Common Law the rule as to money payments (which, however, is rendered practically obsolete by the methods (q] Lalclutnd Jiiilbixiirni- v. John L. (.v) Qu. whether failure to perform this Kcrxfni (1890) 15 Bom. 338. preliminary duty amounts to a breach of (>) Thorn v. City Rice Mills (1889) 40 the whole contract. See Armltage v. Ch. D. 357, 360. Insole (1850) 80 R. R. 388, 14 Q. B. 728. 240 THE INDIAN CONTRACT ACT. 8, 49. of modern business) is that, if no place is named, the debtor is bound to find the creditor, provided he is within the jurisdiction (/) ; but if the obligation is to deliver heavy or bulky goods he must procure the creditor to appoint a place to receive them. " And so note a diversitie between money and things ponderous, or of great weight " (u). The present section lays down a reasonable rule for all cases without distinction (v). The late Tyabji, J., seems to have overlooked the present section when he said that " where no specific contract exists as to the place where the payment of the debt is to be made, it is clear that it is the duty of the debtor to make the payment where the creditor is " (x). Place of delivery. Where by an agreement for the sale of goods it was stipulated that the goods were " to be delivered at any place in Bengal in March and April, 1891," and it was added, " the place of delivery to be mentioned hereafter," it was held by the Judicial Committee that the buyer had the right to fix the place, subject only to the express contract that it must be in Bengal and to the implied one that it must be reasonable. The use of the words " place of delivery to be mentioned hereafter " did not take away that right, nor did they leave the question of the place of delivery to be settled by a subsequent agreement. If the latter had been meant, the expression used would have been "agreed on" instead of " mentioned." It was also held that such a contract does not fall within s. 94 of the Act, but rather resembles what is contemplated in the present section (y). "Without application by the promisee." This section does not apply to cases where money is made payable on demand by the promisee : Raman Chettiyar v. Gopalachari (1908) 31 Mad. 223, at p. 228. Place of performance in pakki adat contracts. In the case of pakki adat agency the place of payment is the place where the constituent resides, unless he has chosen to fix another place by express direction (2). (f) See Haldane v. Johnson (1853) 8 (r) As to delivery of goods sold see Ex. 689, 91 R. R. 705 ; Kedarmal ss. 93, 94. Bhuramal v. Surajmal Oovindram (1907) (x) JUotilalv. Surajmal (1906) 30 Bom. 9 Bom. L. R. 903, at p. 911 ; Puttappa 167, at p. 171. Manjayav. Virabltadrappa (1905) 7Bom > (y~) Grenon v. Lachml Nara'm Augur- L. R. 993. icala (1896) 24 Cal. 8,23 L. R. Ind. Ap. 119. () Co. Lit. 210 b. The danger of (;) Kedarmal v. Surajmal (1908) 10 travelling about England with any con- Bom. L. R. 1230. As to the incidents siderable sum of money, which was serious of pakki adat in general, see Kanji v. in Littleton's time and appreciable in Bhagwandas (1905) 7 Bom. L. R. 57, Coke's, does not seem to have been at p. 65, and s. c. on app. sub now. thought of as an objection. But archaic Bhagwandas v. Kanji (1906) 30 Bom. law rarely favours debtors. 205. PERFORMANCE OF MUTUAL PROMISES. 241 Performance in >0. The performance of any promise Ss. 50, 51. pi^rTbecioJslnc 6 - ma J be &* in any manner, or at any time tioned by promisee. w hi c h ^he promisee prescribes or sanctions. Illustrations, (a) B. owes A. 2,000 rupees. A. desires B. to pay the amount to A.'s account with 0., a banker. B., who also banks with 0., orders the amount to be transferred from his account to A.'s credit, and this is done by 0. Afterwards, and before A. knows of the transfer, 0. fails. There has been a good payment by B. (b) A. and B. are mutually indebted. A. and B. settle an account by setting off one item against another, and B. pays A. the balance found to be due from him upon such settlement. This amounts to a payment by A. and B., respectively, of the sums which they owed to each other. (c) A. owes B. 2,000 rupees. B. accepts some of A.'s goods in reduction of the debt. The delivery of the goods operates as a part payment. (d) A. desires B., who owes him Es. 100, to send him a note for Es. 100 by post. The debt is discharged as soon as B. puts into the post a letter containing the note duly addressed to A. This rule is elementary. It may be doubted whether illustration (c) does not rathw belong to s. 63, but no practical difficulty can arise. The facts of illustration (d) must not be confused with those which have given rise to troublesome questions in cases of contracts by correspondence (ss. 4 and 5, p. 29 sqq. above). Here a complete contract is assumed to exist. It is hardly needful to add that where the request is to send not legal currency, but a cheque or othfcr negotiable instrument, this does not imply any variation of the rule that payment by a negotiable instrument is con- ditional on its being honoured on presentation within due time (a). Payment to an agent, who to the debtor's knowledge had no authority to receive the payment, does not discharge the debtor (V). Performance of Reciprocal Promises. 51. When a contract consists of reciprocal promises to be simultaneously performed, no promisor Promisor not , . . bound to perform, need perform his promise unless the promisee unless reciprocal . promisee ready and IS ready and Willing to perform hlS red- willing to perform. procal promise. (fi) See Kedarmal v. Surajmal (1907) (&) Mackenzie v. Sh'ib Chunder Seal 9 Bom. L. R. 903, at p. 911. (1874) 12 B. L. R. 360. 1.0. 16 [2 THE INDIAN CONTRACT ACT. S. 51. Illustrations. (a) A. and B. contract that A. shall deliver goods to B. to be paid for by B. on delivery. A. need not deliver the goods unless B. is ready and willing to pay for the goods on delivery. B. need not pay for the goods unless A. is ready and willing to deliver them on payment. (b) A. and B. contract that A. shall deliver goods to B. at a price to be paid by instalments, the first instalment to be paid on delivery. A. need not deliver, unless B. is ready and willing to pay the first instalment on delivery. B. need not pay the first instalment, unless A. is ready and willing to deliver the goods on payment of the first instalment. Simultaneous performance. This section expresses the settled rule of the Common Law. To understand the principle rightly, we must remember that in a contract by mutual promises the promises on either side are the consideration, and the only consideration, for one another. But the terms of a promise may express or imply conditions of many kinds ; and the other party's performance of the reciprocal promise, or at least readiness and willingness to perform it, may be a condition. It is obviously immaterial whether it is called a condition or not, if in substance it has that effect. To say " I will pay when you deliver the goods " is more courteous than to say " If you do not deliver the goods in a reason- able time you will not be paid " ; but " when " implies " if," and the result is the same. And if it appears on the whole from the terms or the nature of the contract that performance on both sides was to be simultaneous, the law will attach such a condition to each promise, with the operation laid down in the present section. Performance of one party's promise may have to be completed or tendered before he can sue on the other's reciprocal promise. In that case it is said to be a condition precedent to the right of action on the reciprocal promise. Where the performances are intended to be simultaneous, as supposed in this section (goods to be delivered in exchange for cash or bills, and the like), they are said to be concurrent conditions, and the promises to be dependent. Observe that " concurrent conditions are only a modified form of conditions precedent " (c). Promises which can be enforced without showing performance of the plaintiff's own promise, or readiness or willingness to perform it, are said to be independent. . (c) Langdell, Summary, 32. SIMULTANEOUS PERFORMANCE. 243 It is doubtful whether these terms are of much or any real use. " The S. 51. real question, apart from all technical expressions, is what in each instance is the substance of the contract " (d). But the terras cannot be said to be wholly obsolete, and acquaintance with them is necessary for the understanding of the English decisions. In order to apply the rule of this section we must know whether the promises are or are not " to be simultaneously performed." This is a question of construction, depending on the intention of the parties collected from the agreement as a whole. Before Lord Mansfield's time the Courts inclined to hold every promise or covenant complete in itself and independent (e~), but there has been no such presumption for more than a century. In 1773 Lord Mansfield said that " the dependence or independence of covenants was to be collected from the evident sense and meaning of the parties " (/), and similarly Lord Kenyon in 1797 : " Whether cove- nants be or be not independent of each other must depend on the good sense of the case, and on the order in which the several things are to be done"(<7). There is a distinct question from that of " condition precedent," namely, whether failure to perform some part of a contract deprives the party in fault of any right to remuneration for that which he has performed, and entitles t^e other to put an end to the contract, or is only a partial breach which leaves the contract as a whole still capable of performance. In dealing with cases of this kind it may be very difficult to ascertain the true intention of the parties. We have to "see whether the particular stipulation goes to the root of the matter, so that a failure to perform it ' would render the performance of the rest of the contract by the plaintiff a thing different in substance from what the defendant has stipulated for, or | whether it merely partially affects it and may be compensated in damages " (h). Illustration (b) suggests, though it does not actually raise or decide, a point which has given much trouble, and is not settled either by any of the general provisions of the Act, or by any disposition of the chapter on the Sale of Goods. If A. fails to deliver the first instalment of the goods, or delivers a short quantity, may B. put an end to the contract ? The better opinion, supported by decisions of the Court of Appeal in England and of (d) Per Martin, B., Bradford v. 735, 736. Williams (1872) L. R. 7 Ex. at p. 261. (g) Morton v. Lamb, 7 T. R. 125, 4 (e) For the history of the change see R. R. 395, Finch, at p. 741. Langdell, Summary, 139-143. (h) Per Cur., Bettini v. Gye (1876) 1 (/) Kingston v. Preaton, cited in Jones Q. B. D. 183. v. Barkley, Doug. 659, Finch, Sel. Ca. 162 THE INDIAN CONTRACT ACT. the Supreme Court of the United States (i), is that, in the absence of any specific indication of a contrary intention, he may. But there are also decisions difficult to reconcile with this view (&). The Sale of Goods Act, 1893, s. 31, has purposely left the point open as "in each case depending on the terms of the contract and the circumstances of the case." It seems difficult at this day (except as to the unsettled question last mentioned, which is confined to the sale of goods by instalments) to add anything in principle to the modern rule ; and Indian decisions are, as might be expected, merely illustrative. A contract for the sale of shares in a company to be transferred into the name of the purchaser upon payment of the price by him on or before a certain day falls within this section, so that transfer of the shares and payment of the purchase-money should be concurrent acts (/). Waiver of performance. The section does not, of course, give any remedy to a party who has chosen to perform his part without insisting on the reciprocal performance which was intended to be simultaneous with his own, as where a seller of goods " for cash on delivery " chooses to deliver the goods without receiving the price (m). Readiness and willingness. In the case of a contract for the sale of shares in a company it is not necessary, in order to prove that a vendor was ready and willing to perform his part of the agreement, that he should be the beneficial owner of the shares, or that he should tender to the pur- chaser the final documents of title to the shares. It is enough that he should be able and willing to constitute the purchaser the legal owner of the shares agreed to be sold. Thus where the vendor tendered to the purchaser share allotment and receipt papers, and together with each a transfer paper and an application paper, both signed in blank by the original allottee, it was held that the vendor was ready and willing to perform his promise (ri). But where neither the transfer nor the form of (i) Honcli v. Midler (1881) 7 Q. B. Div. 92; Norrington v. Wright (1885) 115 U. S. 189. (Jt) Simpson v. Orippin (1872) L. R. 8 Q. B. 14 ; Freeth v. Burr (1874) L. R. 9 C. P. 208, which decides only that failure in payment for one instalment is not a repudiation of the whole contract, and to that extent is confirmed by The Mersey Steel and Iron Co.'s Case (1884) 9 App. Ca. 434 ; see p. 217, above. (T) Imperial S a liking and Trading Co. v. At in arum Madharji (1865) 2 B. H. C. 246 ; Imperial Banking and Trading Co. v. Pranjivandas Harjimndas (1866) 2 B. H. C. 258. (m) Sooltan Chund v. Schiller (1878) 4 Cal. 252. The case turned really on s. 39 (see pp. 216, 218, above), and it was not seriously arguable that s. 51 had anything to do with it. () Imperial Banking and Trading Co. v. Atmarain Madhavji (1865)2 B. H. C. 246. See also Parbhudas Pranjirandas v. Ramlal Bhagirath (1866) 3 B. H. C. 69, where " share receipts " with applications for transfer were tendered to the pur- chaser. READINESS AND WILLINGNESS. 245 application for transfer was offered to the purchaser, nor had the vendor any such documents signed by the original allottee in his possession, it was held that the vendor could not be said to be ready and willing to perform his promise, as the allottee had it in his power to decline to complete the contract until he had executed the transfer and the application papers (0). Further, it is not necessary to prove readiness and willingness that the vendor should have made an actual tender to the purchaser of the transfer deed (p). Nor is it necessary that the vendor should have the shares in his possession continuously from the date of the contract down to the time of performance. If a party bound to do an act upon request is ready to do it when it is required he will fully perform his part of the contract, although he might happen not to have been ready had he been called upon at some anterior period ((?). But where the purchaser before the day fixed for delivery gives notice to the vendor that he will not accept the shares, the vendor is exonerated from giving proof of his readiness and willingness to deliver the shares (r). And where the vendor of goods repudiates the contract on being called upon for delivery it is enough for the purchaser to prove that he was ready and willing to carry out his part of the bargain, and had made preparations with the object of having the money ready in hand to pay for the goods on delivery. This section does not require him to show that he made an actual tender of the money (s). Where g*>ods are sold for "cash on delivery," and the vendor delivers a portion of the goods, and the purchaser offers to pay the price thereof if certain cross-claims set up by him are adjusted, it cannot be said that he is not ready and willing to perform his promise, so as to entitle the vendor to refuse delivery of the remaining goods (f). Averment of performance. According to the common law rules of pleading, where a contract consists of reciprocal promises to be simul- taneously performed, neither party to the contract can maintain an action without averring a performance, or an offer to perform, on his own part (u) ; but the necessity for such specific averment has been abolished in England for more than half a century, and now no averment at all of the perform- ance of conditions precedent is required in the first instance in either S. 51. (V) Jit-raj Merjji v. Pmilton (1865) 2 B. H. C. 253. (/;) Imperial Banking and Trading Co, v. Pranjivandas Harjivandas (1865) 2 B. H. C. 258. (') City Discount Co. v. McLean (1874) (1890) All. W. N. 62, where the terms of the L. R. 9 C. P. 692, 700. mortgage bond, the circumstances in which 00 Kaniesii-ar Kocr v. Mahomed Mchdi. it was executed, the relations of the parties Hossein Khan (1898) 26 Cal. 39. 172 260 THE INDIAN CONTRACT ACT. Ss. 60, 61, by a mortgage bond the debtor agreed to repay the loan made to him by the creditor in kind by delivery of certain species of grain, or at his option in cash at a specified rate of interest, and the creditor applied several pay- ments in grain made by the debtor to other antecedent debts, it was held that the creditor was not entitled to do so, as the stipulation to repay the loan by delivery of grain, combined with the absence of evidence to show that the previous debts were to be liquidated by payments of grain, was a circumstance indicating that the payment was to be applied to the debt secured by the mortgage bond (t). Under this section the creditor has a discretion to appropriate a pay- ment by a debtor either to the principal or the interest of his debt. It is for the debtor to show that he had acted in such a way in respect of the payment as to limit the discretion of the creditor (u). As stated by the Judicial Committee, " unless the [debtor] could satisfy [the Court] that there had been an appropriation at the time of payment to the payment oft of the principal, the creditor had a right to consider it as a payment on account of the interest " (#). The same rule applies to judgment debts. Thus when a sum is realised on account of a decree, that amount is to be deducted from the interest and not from the principal(?/). " It appears to be a well-settled practice of the Courts to appropriate payments made upon a bond first to the interest due thereon, and thereafter, if any balance remains, to the principal " (z). Where a payment is made by way of dividend or composition for the benefit of creditors generally, the payments must, by the nature of the transaction, be rateably apportioned among the several debts ; and in any question arising with third parties, as, for example, sureties for any portion of the debts, every payment is deemed to be specifically appropriated " as so much in each and every pound of the whole amount of the debt " (a). See further, as to the result of this, on ss. 128, 140, below. 61. Where neither party makes any appropriation, the Application of payment shall be applied in discharge of the nefthe e r n part h y ere debts in order of time, whether they are or appropriates. are n() j. b arrec i by the law in force for the time being as to the limitation of suits. If the debts are of equal (/) Sutignt Lai v. Baijnath Roy (1886) (y) Oooroo Doss Dutt v. Ooma Churn 13 Cal. 164. Itoy (1874) 22 W. R. 525. () Nirpat v. Shadl (1881) All. W. N. (;) Maharaja of Benares v. liar 119. Naraln Singh (1906) 28 All. 25. (a?) In Luchmesivar Sing Bahadur v. (a) Bardwell v. Lydall (1831) 7 Bing. Syad Lwtf'Ali Khan (1871) 8 B. L. R. 439, 494, 33 R. R. 540, 545. 110, at p 112. NOVATION. 261 standing, the payment shall be applied in discharge of each Ss. 61, 62. proportionally. This section must be read continuously with s. 60. It must be carefully observed that it does not lay down a strict rule of law, but only a rule to be applied in the absence of anything to show the intention of the parties. Not only any express agreement, but the mode of dealing of the parties, must be looked to. On the other hand, the circumstances may show that accounts which it was at a party's option to treat as separate were, in fact, treated as continuous, and then payments will be appropriated to the earliest unpaid item of the combined account (&). The English rule had been followed in India before the enactment of the Contract Act (c). The rule is subject to certain modifications in cases where trust funds capable of identification have been mixed with the trustee's private current account. But these belong to their own special subject (d). Contracts ivhich need not be Performed. Effect of nova- 62. If the parties to a contract agree ^SSS^ to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. Illustrations. (a) A. owes money to B. under a contract. It is agreed between A., B., and 0. that B. shall thenceforth accept C. as his debtor instead of A. The old debt of A. to B. is at an end, and a new debt from 0. to B. has been contracted. (b) A. owes B. 10,000 rupees. A. enters into an arrangement with B., and gives B. a mortgage of his (A.'s) estate for 5,000 rupees in place of the debt of 10,000 rupees. This, is a new contract, and extinguishes the old. (c) A. owes B. 1,000 rupees under a contract. B. owes 0. 1,000 rupees. B. orders A. to credit C. with. 1,000 rupees in his books, but C. does not assent to the arrangement. B. still owes C. 1,000 rupees, and no new contract has been entered into. Novation. The meaning of " novation," the term used in the marginal note to this section, and now the accepted catchword for its (ft) Hooper v. Keay (1876) 1 Q. B. D. sappah v. Gadiyi Muddappa (1871) 6 178 (current account with continuing M. H. . 197. partner after dissolution of firm). (d) See Re IlalleWs Estate (1880) 13 (c) Mooneappah v. Vencatarayadoo Ch. Div. 696 ; Re Stennlng [1895] 2 Ch. (1870) 6 M. H. C. 32 ; Hirada Karibas- 433. 262 THE INDIAN CONTRACT ACT. S. 62. subject-matter, has been thus defined .in the House of Lords : " that, there being a contract in existence, some new contract is substituted for it either between the same parties (for that might be) or between different parties, the consideration mutually being the discharge of the old contract. A common instance of it in partnership cases is where upon the dissolution of a partnership the persons who are going to continue in business agree and undertake, as between themselves and the retiring partner, that they will assume and discharge the whole liabilities of the business, usually taking over the assets ; and if, in that case, they give notice of that arrange- ment to a creditor, and ask for his accession to it, there becomes (sic) a contract between the creditor who accedes and the new firm to the effect that he will accept their liability instead of the old liability, and, on the other hand, that they promise to pay him for that consideration " (e). For the case of a novation on a change in the constitution of a firm it is declared in England by s. 17, sub-s. 3, of the Partnership Act, 1890, that " a retiring partner may be discharged from any existing liabilities by an agreement to that effect between himself and the members of the firm as newly constituted and the creditors, and this agreement may be either express or inferred as a fact from the course of dealing between the creditors and the firm as newly constituted." This adds nothing to the law as already settled (/). It has to be considered in every case not only whether a new debtor has consented to assume liability, but whether the creditor has agreed to accept his liability in substitution of the original debtor's. In some circumstances the creditor may be entitled to sue the retiring or the incoming partner in a firm at his option ; mere continuing to deal with the firm as reconstituted will not preclude him from suing his original debtor (#). Novation is not consistent with the original debtor remaining liable in any form (h) ; it requires as an essential element that the right against the original contractor shall be relinquished, and the liability of the new contracting party accepted in his place (i). It is an elementary rule that trustees and others administering money of which they are not the beneficial owners are not entitled to make a novation (which is to accept one security or liability instead of another) except so far as they are authorised by the trusts under which they act (&). (e) Lord Selborne in Scarf v. Jardine and his choice when made is final. (1882) 7 App. Ca. 345, 351. (A) See Commercial Bank of Tasmania (/) See Rolfe v. Flower (1865) L. R. 1 v. Jones [1893] A. C. 313. P. C. 27 ; Bilborough v. Holmes (1876) 5 (i) Nadlmulla v. Channappa (1903) 5 Ch.D. 255. Bom. L. R. 617; Muhammad SJiah v. O) Scarf \. Jardine (1882) 7 App. Ca. Sarsuti (1883) All. W. N. 254. 345, 351. He cannot, however, sue both, (k) Smith v. Patrick [1901] A. C. 282. NOVATION. 268 Election to accept the sole liability of new or surviving partners in a S. 62. firm does not need very strong proof, but merely ambiguous acts will not do. One of two bankers in partnership died. A customer, knowing of this, drew out part of a sum standing in his name on deposit account, and took, according to the usual course, a fresh deposit note for the amount left in, signed by a cashier on behalf of the firm. This was no proof of novation (I). Another customer, also with the knowledge of the former partner's death, transferred a sum of money from current to deposit account (after consulting the surviving partner about investing it) and took a receipt signed by the surviving partner on behalf of the firm. This was a new contract with the surviving partner alone (ni). The present section does not apply where the agreement to substitute a new contract for the original one is made after the breach of the original contract. In a Calcutta case (n) the plaintiff sued the defendant to recover a sum of Es. 1,100 due on a bond. It was found that after the due date of the bond the plaintiff agreed to accept from the defendant in satisfaction of the bond Rs. 400 in cash and a fresh bond for Rs. 700 (not the mere promise to pay the Rs. 400 and to give a bond for Rs. 700). The defendant failed to pay the Rs. 400 and to pass the bond, and the plaintiff sued to recover the amount of the original bond. For the defendant it was contended that the subsequent agreement had made a novation. The Court, however, held that s. 62 did not apply, as the subsequent agreement was entered into after the breach of the original contract, and that the defendant, having failed to perform the satisfaction which he had promised to give, remained liable on the original contract. " If the parties to a contract have in fact made a new contract in substitution of the old, or have modified the old one,- then the old contract is at an end, and the new contract or the modified contract takes its place ; but the mere fact of one party alleging that a new contract has been substituted for the old one does not of itself put an end to the old contract, even as against the party who so alleges, unless the allegation is proved to be true. S. 62 of the Contract Act made no difference in the law in that respect " (0). Whether or not there is a novation of a contract is in each case a question of fact.' Thus, in a suit (p) by the Government of Bengal against the defendant as surety for the treasurer of a collectorate on four surety bonds executed by the defendant, the Judicial Committee held that the (0 Re Head [1893] 3 Ch. 426. 0) Per Garth, C.J., in Uoushan Bibee (ni) Be Head (No. 2) [1894] 2 Ch. 236, v. Hurray Kristo Nath (1882) 8 Gal. C. A. 926, 929. () Manohur v. Tkaltur Das (1888) 15 (^p) Lola Bannhidhar v. The Govern* Cal. 319. went of Bengal (1872) 9 B. L. E. 364. 264 THE INDIAN CONTRACT ACT. S. 62. mere fact that the collector examined the accounts at the end of each year and struck the balance which he certified to be correct, and that on each occasion the defendant executed a new bond without, however, the old bonds being cancelled or given up, did not constitute a novation of the old bonds so as to preclude the Government from suing the defendant on the old bonds on subsequent discovery of embezzlement of moneys by the treasurer during each year. Alteration of Contract. In English usage the term novation is confined to agreements which introduce a new party. It is not applied to the substitution of a new agreement, or the variation of particular terms in a subsisting agreement, between the same parties. Practically the most important questions arising in this last connection are questions of evidence, and for this purpose the rules forbidding the admission of oral evidence to contradict or vary written agreements (q) have to be borne in mind. It must of course be shown, especially whore it is sought to prove a variation not by an express agreement, but by a course of conduct, that the variation was intended and understood by both parties (/*). In the case of such an agreement to substitute a new contract, that which is substituted must be a contract capable of being enforced in law ; so that if by reason of any want of formality, such as registration, the document containing the contract is inadmissible in evidence, the original contract will still be operative (s). In Sirdar Kuar v. Chandrawati (t) accounts were stated between a creditor and his debtor, and the latter passed the former a bond for the balance found due payable by instalments, in which he hypothecated certain immovable property as collateral security. The creditor received payment of three of the instalments under the bond, and then brought a suit against the debtor for the balance of the debt, basing his claim on the accounts stated. It was held that the suit would not lie, as by the execution of the bond the debt due on the accounts stated had come to an end. It appears from the report of this case that the bond was impounded by the revenue authorities, as it was insufficiently stamped, and this seems to be the reason for bringing the suit on the original debt instead of on the bond. It has been held (u) that this decision does not apply if the execution of the () See Indian Eegistration Act III of Ganesh Das (1891) Pun]'. Eec. no. 82; 1877, s. 49. Baldeo v. Mvl Chand (1904) Punj. Rec. (a?) Kiam-ud-din v. Rajoo (1888) 11 no. 7. All. 13. (z) Ede v. KatvLo Nath Shaw (1877) 3 (y) SJteiklt Akbar v. Slie'Mi Khan Cal. 220, where it seems to be supposed (1881) 7 Cal. 256 ; Dargavarapu v. Ram- that s. 37 of the Contract Act has pratapu (1902) 25 Mad. 580 ; Yarlagadda abolished all defences to actions on Veera Ragarayya v. Gorantla Ramayya contracts not expressly mentioned in the (1906) 29 Mad. Ill ; Rahmatulla v. Act. 266 THE INDIAN CONTRACT ACT. S. 62. instrument made by a party, or by any one while it is in the party's custody or in that of his agent, disables him from relying on it either as plaintiff or as defendant (). In its earliest form it was connected with the old manner of pleading and producing deeds, but in modern times it was deliberately extended on grounds of policy : " A party who has the custody of an instrument made for his benefit is bound to preserve it in its original state " (&). The principle is said to be " founded on great good sense, because it tends to prevent the party in whose favour [an instrument] is made from attempting to make any alteration in it " ; and it is "as applicable to one kind of instrument as to another" (c). Any alteration is material which affects either the substance of a contract expressed in the docu- ment (d), or the identification of the document itself, at all events where identification may be important in the ordinary course of business (). Alterations are immaterial if they merely express what was already implied in the document, or add particulars consistent with the document as it stands, though superfluous (/), or are innocent attempts to correct clerical errors (g). There may be cases of wilful fraud practised by a stranger where the rule will not be held to operate against the person who had the custody of the document (h). It may be that some degree of negligence on his part would in such a case have to be shown before he could be deprived of his rights. Indian decisions. The Indian decisions on the subject may be divided into two classes. The first class comprises cases in which the suits were for bond debts brought upon the basis of altered documents. The second class relates to suits on documents which by the very execution thereof effect a transfer of interest in specific immovable property. As (a) Leake, 573 ; Pattinson v. Luchley substantially the same note. It does not (1875) L. R. 10 Ex. 330 ; Suffellv. Bank follow that in other kinds of documents of England (1882) 9 Q. B. Div. 555, where commonly marked with consecutive num- authorities are collected ; notes to Master bers the numbers are material ; but the v. Miller in 1 Sm. L. C. fact that a person takes the trouble of (i) Davidson v. Cooper (1844) 13 M. & altering a number shows that in his W. ?43, 352, 67 B. R. 638, Ex. Ch. opinion, at any rate, it is material for (c) Grose, J., in Master v. Miller (1791) some purpose. 4 T. R. 320, 345, 2 R. R. 399, 406, 1 Sm. (/) Lowe v. Fox (1887) 12 App. Ca. L. C. at p. 795. 206, where the document was a form of (d) The alteration need not be obviously statement required by the Lunacy Act to the disadvantage of the party whose then in force. position is altered. See Gardner v. Walsh (g) Howgate and Osborn's Contract (1855) 5 E. & B. 83. [1902] 1 Ch. 451. (e) Stiffell v. Sank of England (1882) (7t) Per Lord Herschell, 12 App. Ca. at 9 Q. B. Div. 555. A Bank of England p. 217. note with the number altered is not ALTERATION OF DOCUMENT. 267 to the former class of cases, the Indian Courts have followed the principles S. 62. of English law set out above, the point for decision in each case being whether the alteration was or was not material. Thus where a bond was passed to the plaintiff by one of three brothers, and the plaintiff forged the signature of the other two to the bond, and brought a suit upon it in its altered form against all the three brothers, it was held that the alteration avoided the bond (). In such a case the plaintiff is not entitled to a decree even against the real executant. Similarly, where the date of a bond was altered from llth September to 25th September, it was held that the alteration was material, as it extended the time within which the plaintiff was entitled to sue ; it did not matter that the period of limitation, though reckoned from llth September, had not expired at the date of the suit (&). Likewise, where the plaintiff altered a bill of exchange from D.P., that is, documents to be delivered against payment, into D.A., that is, documents to be delivered against acceptance, it was held that the drawer was not liable upon the altered bill (/). But the fact that the signature of an| attesting witness has been affixed after execution to a bond that does not require to be attested is not a material alteration, and does not make the bond void (ni). Nor is it a material alteration to add in a document a description of immovable property which is not within the scope of the document (). And where a seller of goods inserted in the document of sale a clause excepting a claim on a former account, it was held in a suit by him for the price of the goods that the alteration was not material so as to defeat his claim for the price (0). Besides the alteration being material, it must have been made in a document which is the foundation of the plaintiff's claim. A material alteration, therefore, in a written acknowledg- ment of debt does not render it inoperative, as the acknowledgment is merely evidence of a pre-existing liability (p). In the last-mentioned cases, (/) Gogun Cliunder Ghose v. Dhuroni- 2 Mad. L. J. 39 ; Mangal Sen v. Cannon dhur (1881) 7 Cal. 616 ; Gour Chandra Das (1885) Punj. Kec. no. 118. v. Prasanna Kumar Chandra (1906) 33 () Abtlool Hoosein v. Goolam Hoosein Cal. 812 ; Karamali v. Naraln Singh (1900) (1906) 30 Bom. 304, 318. Punj. Eec. no. 91. (o) Goi-indasami Naidu v. Kuppu-sami (It) Govindasami v. Kuj>putami (1889) Plllai (1893) 3 Mad. L. J. 266. 12 Mad. 239. (p) Atmamni v. Umedrant (1901) 25 (1) MeshaAhronel v. The National Banlt. Bom. 616 (where the date of the acknow- of India, Ltd. (1903) 5 Bom. L. R. 524. ledgment was altered) ; Ilarendra Lai (w) Kashi Naih Roy v. Surbanand Roy v. Uma Cliaran Ghosh (1905) 9 C. Shaha (1885) 12 Cal. 317 ; Venkatcsh v. W. N. 695 (where an entry as to interest Baba (1890) 15 Bom. 44; Ramayyar v. was interpolated in the acknowledgment) ; Shanmugam (1891) 15 Mad. 70, dissent- Lai Saha v. Monmohan Gossami (1900) 5 ing from Sitaratn v. Daji (1883) 7 Bom. C. W. N. 56, where the suit was founded 418; Hamier v. Shunmtigam Pillai (1892) on the original loan, and the plaintiff 268 THE INDIAN CONTRACT ACT. S. 62. it is to be observed, the suit was not founded on the acknowledgment, but on the original loan, and the acknowledgment was relied on merely to save the plaintiff 's claim from being barred, and the Court admitted it in evidence for that purpose. But where a creditor bases his suit, not on the original loan, but on a bond passed by the defendant, and it is found at the hearing that the bond has been materially altered so as not to entitle him to a decree on the bond, the plaintiff will not be allowed to fall back upon the original consideration, and to rely on the altered bond as proof of acknowledgment (q). And it has been held by the Madras High Court (r) that a purchaser for value of a piece of land from a person empowered to sell under a will is not precluded from relying upon the will to prove the validity of the sale, though forged attestations are added to the will after the sale. The decision is obviously right, for the purchaser never had the custody of the will, nor is a will a document to which any one, properly speaking, is party or privy ; and his title was complete before the forged attestations were made. We shall next consider the cases where the effect of the execution of the altered document is to create an interest in the property comprised in the document. Of the five Indian decisions on this head two relate to hypo- thecation bonds, and three to mortgages (s) of immovable property. The rule to be derived from these cases may be stated as follows : A material alteration, though fraudulent, made in a mortgage or hypothecation bond does not render it void for all purposes, and the altered document may be received in evidence on behalf of the person to whom it is executed for the purpose of proving the right title or interest created by, or resulting from, the execution of the document, provided that the suit is based on such right, and not on the altered document. This rule is professedly founded by Indian Courts on English decisions (f). The reason is stated to relied on a promissory note alleged to (.?) " A mortgage " in this country is have been passed by the defendant as " tlie transfer of an interest in specific evidence of the loan. It was found that immovable property for the purpose of the note was not genuine, but the plaintiff securing the payment of money advanced was allowed to prove the debt by other or to be advanced by way of loan," etc. : evidence, on the ground that, though the Transfer of Property Act, 1882, s. 58. note was forged, the suit was not founded (?) Davidson v. Cooper (1844) 13 M. & on the note. This is a case of entire W. 343, G7 R. R. 638 ; Doe d. Heartland fabrication, as distinguished from altera- v. Hirst (1821) 23 R. R. 756 ; Tfntcftinsv. tion, of a document. Scott (1837) 2 M. & W. 809, 46 R. R. 770 ; (if) Oour Chandra Das v. Prasanna West v. Steward (1845) 14 M. & W. 47; Kumar Chandra (190G) 33 Cal. 812 Agricultural Cattle Insurance Co. v. (where names of parties were added). Fitzgerald (1851) 16 Q. B. 432. See (?) Paramma v. Ramachandra (1883) these cases collected in Mangal Sen v. 7 Mad. 302. S/iankar (1903) 25 All. 580. ALTERATION OF DOCUMENT. 269 be that the right title or interest created by, or resulting from, the very S. 62. fact of the execution of a document does not rest on a contract or a covenant, but arises by operation of law, and a subsequent alteration, therefore, does not divest the vested right and revest the property in the mortgagor (u). In the earliest of these cases, known as Ramasamy Kon's Case (x), the plaintiff, who held a hypothecation bond from the defendants, altered the date of the bond so as to bring the personal remedy, which according to the true date was barred, within the period of limitation. The suit was to recover the balance of the bond debt from the defendants personally, and by sale of the hypothecated property. The Court passed a decree for the amount due against the properly, holding that the altered document might be used as proof of the right created by or resulting from its having been executed. The exact frame of the plaint in this case is not stated in the report, and, according to later cases, the decision could only be upheld if the suit was not based on the altered document (//). In Ganga Ram v. Ghandan Singh (#), a case similar to the above, a hypothecation bond was fraudulently altered by the plaintiff so as to comprise a larger area of land than was actually hypothecated. The suit was brought on the altered bond, and it was held in appeal by the High Court of Allahabad that the suit was rightly dismissed by the lower Court (a). In a subsequent Madras case (b) the plaintiff sued to recover the principal and interest due on a mortgage bond fraudulently altered by him by doubling the rate of interest and inserting a condition making the whole sum payable upon default of payment of any one instalment. The suit was brought on the (u) Christackarluv. Karibasayya (1885) appellants in both appeals. 9 Mad. 399, 412 ; Subrahmania v. Krishna (y) See Christacharlv, v. Karibasayya (1899) 23 Mad. 137, 143 ; Mangal Sen v. (1885) 9 Mad. 399, 410, 420. Shankar (1903) 25 All. 580, 596, 604. In (z) (1881) 4 All. 62. the last of these cases, Aikman, J., said in (a) Though the soundness of this a dissenting judgment that the view that decision has not been questioned, there is the rule as to material alteration has no a passage in the judgment, " The bond application to the case of mortgages would now produced by the plaintiff should be be a premium on dishonesty, and would discarded as evidence of the hypothecation enable a mortgagee to try the experiment of land," which is against the principles of claiming a fraudulently enhanced set out in the text, and is held in sub- amount of mortgage money without the sequent cases to be against the weight of risk of losing when the fraud is dis- authority. See Christacharlu v. Kari- covered: pp. (ill, 612. basayya (1885) 9 Mad. 399, 412; and (a?) (1866) 3 M. H. C. 247. The judg- Mangal Sen v. ShanTtar (1903) 25 All. ment in this case was pronounced in two 580, 604. appeals relating to the same point. (i) Ckristacliarhi v. Karibasayya Ramasamy Kon and others who were (1885) 9 Mad. 399. plaintiffs in the original suit were 270 THE INDIAN CONTRACT ACT. S. 62. altered bond, and the full Bench confirmed the decision of the Courts below, dismissing the plaintiffs entire claim. In Subrahmanta v. Krishna (c), on the other hand, where also a mortgage bond was altered in a material respect, the suit was not based on the altered bond (d), and the Court allowed the bond to be used as proof of the mortgagee's right to sell the property. In the last of the series of cases, decided by a full Bench of the Allahabad High Court (e), a puisne mortgagee brought a suit for sale against his mortgagors, and impleaded therein as a defendant a prior mortgagee, offering to redeem the prior mortgage. The prior mort- gage, when tendered in evidence by the prior mortgagee, was found to have been tampered with, and altered in a material particular, the extent of the share mortgaged having been increased. Upon these facts it was held that such alteration did not render the instrument void in toto, so as to justify the Court in ignoring its existence and passing a decree in favour of the plaintiff for sale of the property comprised in it without payment of the amount due under it to the prior mortgagee. It will be seen that in this case there was no suit brought upon the altered document, nor was the prior mortgagee a plaintiff ; but the decision of the majority of the full Bench did not rest upon these narrow grounds (/). In both these classes of cases it has been held that where a suit is brought by a plaintiff on a document fraudulently altered by him he will not be allowed subsequently to amend the plaint so as to base his claim on the document as executed by the defendant (g). The Courts do not appear to have decided in these cases that the defendant is not liable in some form of proceeding to repay money which he has actually received (h). In the case of negotiable instruments the English rule has been adopted to its full extent, as will be seen from ss. 87 89 of the Negotiable Instruments Act XXVI of 1881 : S. 87 : "Any material alteration of a negotiable instrument renders (c) (1899) 23 Mad. 137. which a defendant (prior mortgagee) has () Brohmo Dutt v. Dharmo Das Gkose (y) P. 273, above. (1898) 26 Cal. 381, per Maclean, C.J., (2) Trintbah v. JBhagioandag (1898) 28 expressly without giving a final opinion. Bom. 348. 182 276 THE INDIAN CONTRACT ACT. S. 64. As to the applicability of this section to contracts rescinded under s. 39, see the commentary on s. 65 under the head " Becomes void." The direct application of this section, according to recognised canons of interpretation, is only to contracts declared voidable by the Act ; but the principle which it affirms is one of general jurisprudence and equity, and applicable in various other cases. In Sinaya Pillai v. Munixami Ayyan (c) a mortgage was executed by the guardian of a minor appointed under the Guardian and Wards Act without obtaining the sanction of the Court, as required by s. 29 of the Act. Such a mortgage is voidable under s. 30 of that Act. Here the High Court said that the mortgage could not be avoided on belialf of the minor, except on restoring to the mortgagee the benefit received by the minor's estate under the mortgage, and based its decision on the principle which, as the Court said, " is acknowledged in s. 64 of the Indian Contract Act, in s. 35 of the Transfer of Property Act, and generally by the Indian Courts as Courts of equity and good conscience." The same rule appears in ss. 38 and 41 of the Specific Relief Act. Minor's contract. It was settled that this section did not apply to a minor's contract, assuming that such contracts were only voidable. The term " person " in this section does not comprise a minor, but means such a person as is referred to in s. 11, namely, a person who (among other conditions) is of the age of majority according to the law to which he is subject. But, since the decision of the Judicial Committee that a minor is wholly incapable of contracting (d~), there is no arguable question, and further authority is needless. It does not follow, however, that a minor is entitled both to repudiate his agreement and to retain specific property which he has acquired under it, or to recover money after receiving for it value which cannot be restored. General principles of equity seem incompatible with such a result, and it would certainly be contrary to English authority (e). See notes to s. 11 under the head "Minor's contract," and the cases there cited. Election to rescind. The broad principle on which this and the following section rest, and which, as we have seen, is not confined to cases (c) (1898) 22 Mad. 289 ; Tejpal v. (e) See Valentini v. Canali (1889) 24 Ganga (1902) 25 All. 59. See also Q. B. Div. 166, and cp. Nottingham Build- Kurarji v. Moti Harldas (1878) 3 Bom. ing Society v. Thurstan [1903] A. C. 6, 8, 234. 10, and judgments of Homer, L.J., and (cT) Mohori B'ibee v. Dharmodas Ohose Cozens-Haidy, L.J., in C. A. [1902] 1 Ch. (1903) 30 Cal. 539, L. R. 30 Ind. Ap. 114, at pp. 10, 13. See Dattaram v. VinayaTt followed in Kamta Prasad v. Sheo Gopal (1903) 28 Bom. 181. Lil (1904) 26 All. 342. ELECTION TO RESCIND. 277 expressly included in either of them, was thus stated in England in one of S. 64. the weightiest judgments of recent times : " No man can at once treat the contract as avoided by him, so as to resume the property which he parted with under it, and at the same time keep the money or other advantages which he has obtained under it"(/). For the same reason, a man cannot rescind a contract in part only. When he decides to repudiate it, he must repudiate it altogether. If he has put it out of his power to restore the former state of things, either by acts of ownership or the like, or by adopting and accepting dealings with the subject-matter of the contract which alter its character, as the con- version of shares in a company, or if he has allowed third persons to acquire rights under the contract for value (g), it is too late to rescind, and the remedy, if any, must be of some other kind. "You cannot both eat your cake and return your cake " (A). It is hardly needful to say that rescission must be express and unequivocal. The clearest form of it is bringing a suit to set aside the contract. The will to rescind may also be declared by way of defence to an action brought on the contract ; a declaration to that effect before action brought is not necessary as matter of law (/), though, generally speaking, the prudent course is to repudiate as soon as possible. See s. 66, p. 284, below. By the Common Law lapse of time is not of itself a bar to setting aside a contract (subject to the risk of indefeasible rights having been acquired by third persons), but may be material as evidence of acquiescence, that is, of a tacit election to affirm the contract. But in British India, by the Limitation Act (&), a suit for the rescission of a contract must be dismissed, even though the defence of limitation is not set up, unless brought within three years from the time when the facts entitling the plaintiff to have the contract rescinded first became known to him. English authorities on what amounts to acquiescence would seem, there- fore, to have very little practical application. (/) Clough v. L. fy N.- W. R. (1871) long since obsolete, and not very clear on L. K. 7 Ex. 26, 37 in Ex. Ch. The the facts and dates, but the rule in judgment was Lord Blackburn's, though question is correctly laid down, not delivered by him. See 7 App. Ca. at (A) Crompton, J., E. B. &, E. at p. 152. p. 360. (K) IX of 1908, s. 3, and Sched. I., (g) -Clarke v. Dickson (1858) E. B. & E. art. 114. 148, decided on a state of company law 278 THE INDIAN CONTRACT ACT. S. 65. 65. When an agreement is discovered to be void, or obligation of when a contract becomes void, any person who nas received any advantage under such agree- men * i or contract is bound to restore it, or to that becomes void. ma k e compensation for it, to the person from whom he received it. Illustrations. (a) A. pays B. 1,000 rupees in consideration of B.'s promising to marry C., A.'s daughter. C. is dead at the time of the promise. The agreement is void, but B. must repay A. the 1,000 rupees. (b) A. contracts with B. to deliver to him 250 maunds of rice before the first of May. A. delivers 130 maunds only before that day and none after. B. retains the 130 maunds after the first of May. He is bound to pay A. for them. (c) A., a singer, contracts with B., the manager of a theatre, to sing at his theatre for two nights in every week during the next two " months, and B. engages to pay her a hundred rupees for each night's performance. On the sixth night A. wilfully absents herself from the theatre, and B., in consequence, rescinds the contract. B. must pay A. for the five nights on which she had sung. (d) A. contracts to sing for B. at a concert for 1,000 rupees, which are paid in advance. A. is too ill to sing. A. is not bound to make compensation to B. for the loss of the profits which B. would have made if A. had been able to sing, but must refund to B. the 1,000 rupees paid in advance. Duties of restitution. The matter corresponding to this and the last foregoing section, besides s. 39, is scattered about English books in the shape of technical rules and exceptions unintelligible, as usually stated, to any one who is not acquainted, not only with modern English law, but with the formulas of the ancient common law system of pleading which has been obsolete in England for half a century, and survives only in a certain number of American jurisdictions. However, the substance of the question involved may be put thus : " In what cases may an action be brought by a person who has entered into a special contract against the person with whom he has contracted, while his own side of the contract remains unperformed ? " (I) And, as in English law the plaintiff, if he recover at all, must do so either on the original contract or on some other implied contract, it has to be considered whether the special contract is subsisting, but the defendant has dispensed the plaintiff from performing his part by making it impossible or otherwise, and, if it is not subsisting, (0 2 Sm. L. C. 10, llth ed. DUTIES OF RESTITUTION. 279 whether a new contract by the defendant to pay for work done or other S. 65. benefit which he has accepted, as the case may be, can be inferred. In the case where a party has contracted to do an entire work for a specific sum, he " can recover nothing unless the work be done, or it can be shown that it was the defendant's fault that the work was incomplete, or that there is something to justify the conclusion that the parties have entered into a fresh contract " (m). The illustrations to this section are rather miscellaneous. In (a) we have a simple case of money paid under a mistake (cp. s. 72). In (b) it does not seem that the contract has become void at all, but, on the contrary, that B. has elected to affirm it in part, and dispense with the residue ; there is no new contract under which he is bound to pay for the r^_ 130 maunds of rice, as is shown by this, that what he does accept he is undoubtedly bound to pay for at the contract price. In (c) it is not clear whether the contract is to be treated as divisible, so that A. is entitled to Rs. 100 for each night on which she did sing, or the Court is to estimate what, on the whole, the partial performance was worth ; nor would it be clear in England without fuller statement of the terms and circumstances. Illustration (d) is again simpler ; English lawyers would refer it to the head of money paid on a consideration which fails. Scope of the section. This section applies only to cases where an agreement is discovered to be void, or when a contract becomes void. It does not apply to agreements which are void ab initio on the ground of the object or consideration being unlawful within the meaning of s. 23 of the Act(n). Nor does it apply in cases where there is a stipulation that, by reason of a breach of warranty by one of the parties to the contract, the other party shall be discharged from the performance of his part of the contract. An insurance company is not, therefore, bound under the provisions of this section to refund to the heirs of the assured the premiums paid on the policy of life assurance where the assured had committed a breach of the warranty by making an untrue statement as to his age (0). The expression " discovered to be void " seems appropriate only to cases where the agreement is void by reason of some fact not known to the parties at the time of making it. An agreement by way of wager is one which from its very nature must be known to the parties to be void, and, therefore, moneys deposited under such an agreement cannot be recovered under this section ( p ). A similar question is whether a transferee of a (ni) Appleby v. Myers (1867) L. B. 2 (0) Oriental Government Security Life C. P. 651, 661, judgment of the Ex. Ch. Assurance Co., Ltd. v. Narasimha Chart per Blackburn, J. (1901) 25 Mad. 183, 214. (it) Amir Khan v. Saif Ali (1893) Punj. (_p) Dayabhai Tribhorandas v. Lakh- Eec. no. 86. midland Panacliand (1885) 9 Bom. 358. U THE INDIAN CONTRACT ACT. S. 65. property which from its very nature is inalienable (#) is entitled under the provisions of this section to recover back the purchase-money from the transferor if the transfer is declared illegal and void by a decree of a Court or is otherwise discovered to be void. It would seem that he has the right to do so if he was not aware of the unlawful character of the transaction at the time it was entered into. Cases in which the object of the transfer is unlawful to the knowledge of both the parties do not come within this section. In such cases, where the illegal purpose is not carried into execution, the transferee will be deemed to hold the property for the benefit of the transferor, as provided by s. 84 of the Trusts Act. Where, however, the unlawful object is accomplished, the transferee will not be disturbed in his possession, on the principle embodied in the maxim In part delicto potior est conditw defendentis (r). The same rule applies where the unlawful object has been accomplished substantially, though not in its entirety (s). But the maxim requires that the act should be par delictum, and it will not, therefore, apply where the transferor is not as guilty and is not to blame as much as the transferee (t). The provisions of this section were held applicable in a recent Bombay case (), where a lease was terminated by the lessee under the provisions of the Transfer of Property Act on the destruction of the property by fire. In that case the plaintiff hired a godown from the defendant for a period of twelve months and paid the whole rent to him in advance. After about seven months the godown was destroyed by fire, and the plaintiff claimed a refund from the defendant of a proportionate amount of the rent, and subsequently brought a suit for the same. The Court held that the provi- sions of s. 108 (e) of the Transfer of Property Act applied to the case, and that the plaintiff was entitled under this section to recover the rent for the unexpired part of the term. The demand for a refund was treated by the (<) See for an illustration Krishnan v. and 20 Mad. 326 have been dissented from Sankara Varma (1886) 9 Mad. 441. is misleading: see per Rampini, J., on (r) Tamaraxherri Sivithri v Maranat p. 969, and per Mookerjee, J., on p. 983) ; Vasudemn (1881) 3 Mad. 215 ; Chenvi- Mussammat Roshun v. Muhammad (1887) rappa v. Pvttappa (1887) 11 Bom. 708 ; Punj. Rec. no. 46 ; Pirt/ia Das v. Him Rangammal v. Venkatachari (1895) 18 Singh (1898) Punj. Rec. no. 63 ; Pether- Mad. 378, (1896) 20 Mad. 323 ; Yaramati perumal v. Muniandy (1908) 18 Mad. v. Chundru (1897) 20 Mad. 326 ; Kondeti L. J. 277 [P. C.]. Kama Row v. JVukamma (1908) 31 Mad, (s) Muthuraman Chetty v. Krishna 485 ; Goterdhan Singh v.Ritu Roy (1896) Pillai (1906) 29 Mad. 72. 23 Cal. 962 ; Banka Sehary Dass v. Raj (0 See Trusts Act, s. 84, and Specific Kumar Dags (1899) 27 Cal. 231 ; Gonnda Relief Act, s. 35 (b), and illustration Kuar v. Lala Kishun Prosad (1900) 28 thereto. See also S/tam Lall Mitra v. Cal. 370 ; Jadu Nath Poddar v Rup Lai Amarendro Nath Bone (1895) 23 Cal. 460. Poddar (1906) 33 Cal. 967 (the portion of (u) Dhuramsey v. Aftmedbhai (1898) 23 the head-note stating that 11 Bom. 708 Bom. 15. AGREEMENT DISCOVERED TO BE VOID. ^ 281 Court as a notice to the defendant avoiding the lease (v). It was also stated S. 65. in the judgment that the right to compensation under this section does not depend on the possibility of apportionment (x). Now s. 108 of the Transfer of Property Act provides that, in the event of the property let being destroyed by fire, " the lease shall at the option of the lessee be void." S. 4 of the same Act provides that the sections of the Act relating to contracts shall be taken as part of the Contract Act. If s. 108 be regarded as one relating to contracts, it is clear that, the lease having become voidable under that section, the provisions of s. 65 of the Contract Act could have no applica- tion, as they do not deal with voidable contracts. Nor does s. 64 apply to the case, as that section is confined to the liability of a party avoiding a contract. The only section that seems applicable would be s. 75 of the Act. No doubt a voidable contract on rescission becomes void, but that could be no reason for the application of s. 65, as the provisions of s. 64 would otherwise be superfluous. This section does not apply to cases where a person agrees to supply goods to, or do some work for, a municipal corporation, and goods are supplied or the work done in pursuance of the contract, but the contract is required by the Act under which the corporation is constituted to be executed in a particular form, and it is not so executed. In such cases (y) the corporation cannot be charged at law upon the contract, though the consideration has been executed for the benefit of the corporation. " The Legislature has made provisions for the protection of ratepayers, share- holders and others who must act through the agency of a representative body by requiring the observance of certain solemnities and formalities which involve deliberation and reflection. That is the importance of the seat". It is idle to say there is no magic in a wafer. . . . The decision may be hard in this case on the plaintiffs, who may not have known the law. They and others must be taught it, which can only be done by its enforcement " (z). This decision was followed by the High Court of Allahabad in Radha Krishna Das v. The Municipal Board of Benares (a). The plaintiff had supplied to the defendant municipality stone ballast for metalling the municipal roads in accordance with his tender, which had been accepted, but the contract was not in writing signed by the chairman and secretary of the municipality, as required by the Municipal Act (ft). (0) See s. 66, p. 284, jwst. The "wafer" is the common modern (x) Citing Cunningham and Shephard's substitute for a waxen seal, notes to s. 65. () (1905) 27 All. 592. (?/) Youiig fy Co. v. Corporation of (V) N.-W. P. and Oudh Municipalities Royal Leamington Spa (1883) 8 App. Act XV of 1883, s. 40, and Local Act Cas. 517. No. 1 of 1900, s. 47. (c) Ibid., per Lord Bramwell, at p. 528. 282 THE INDIAN CONTRACT ACT. S. 65. The plaintiff sued the municipality for the value of the materials supplied (c), and for damages for refusing to accept delivery of the rest of the ballast. It was held that the plaintiff was not entitled to recover ; the contract, not having been committed to writing and signed as required by the Municipalities Act, could not form the basis of any suit against the municipality, notwithstanding that ballast was supplied in pursuance of it. It was also held that the section did not apply, as the case was not one where the agreement was " discovered to be void," or had " become void," within the meaning of the section. This decision is in obvious conflict with a prior decision of the High Court of Bombay (d). In that case the Municipality of Trirnbak granted to the defendant the right of levying and collecting certain tolls for a period of fourteen months, for which the defendant agreed to pay to the municipality Rs. 15,001. The contract was required by the Bombay District Municipal Act (e) to be sealed with the seal of the municipality, but it was not so sealed. The defendant levied and collected the tolls and paid part of the agreed amount, but failed to pay the balance, for which the municipality brought a suit against him. The defence was (1) that the municipality had dispensed with the payment of the amount claimed, and (2) that the contract, not being under seal, was unlawful within the meaning of s. 23, as, if enforced, it would defeat the provisions of the Act, and that it could not there- fore be enforced against the defendant, though the consideration had been executed for his benefit. The defence failed on the first point for reasons that have been reproduced in the notes to s. 63 (/). It failed on the second point on the ground thus stated in the judgment : " It is a well recognised law in England that though a contract by a corporation must ordinarily be under seal, still where there is that which is known as an executed consideration an action will lie, though this formality has not been observed. Notwithstanding s. 23 of the Indian Contract Act, we see no reason for not adopting the same view of the law here. For we think, when regard is had to the principle on which the English Courts have proceeded, it is clear we do not run contrary to any provision of s. 23 of the Contract Act in holding that in this country too, as in England, where there is an executed consideration, a suit will lie even in the absence of a sealed contract." The above statement of the law was characterised by (c) The municipality had in this case () (1903) 30 Cal. 593 ; L. R. 30 Ind. Appasami (1894) 17 Mad. 257, it was held Ap. 114. under similar circumstances that the suit (#) WatUns v. Dhunnoo Baloo (1881) would not lie. See also Venltata v. 7 Cal. 140. In this case the suit was Timmayya (1898) 22 Mad. 314. brought by an attorney appointed by the (?) Sham Charari Mai v. Chowdhry guardian ad litem of the minor to recover Debya Singh (1894) 21 Cal. 872. See his costs from the minor. The attorney also Sundaraja Ayyangar v. Pattana- was engaged by the guardian, and no thusami Tevar (1894) 17 Mad. 306. question was raised as to whether under (g)Kidar Nath v. Ajudhia (1883) Punj. the circumstances the suit would lie Rec. no. 185. See also Atmaram T. Hunar against the minor. In Branson v. (1888) Punj. Rec. no. 96. REIMBURSEMENT AND INDEMNITY. 287 English law. This section lays down in one respect a wider rule than S. 69. appears to be supported by any English authority. The words "interested in the payment of money which another is bound by law to pay " might include the apprehension of any kind of loss or inconvenience, or at any rate of any detriment capable of being assessed in money (f). This is not enough, in the Common Law, to found a claim to reimbursement by the person interested if he makes the payment himself. Authoritative state- ments in English books are much more guarded, for example : " If A. is compellable to pay B. damages which C. is also compellable to pay B., then A., having been compelled to pay B., can maintain an action against C. for money so paid, for the circumstances raise an implied request by C. to A. to make such payment in his case. In other words, A. can call upon C. to indemnify him " (u). It will be observed that the obligation had to be stated as a fictitious contract in order to find a place for it within the rules of common law pleading. The meaning is that C., who did not in fact ask A. to pay, is treated as if he had done so. In jurisdictions where the old rules of pleading have been abrogated, or were never in force, the fiction is super- fluous, and the duty may be expressed, as in this section, in plain and direct terms. The late Mr. Leake did this in language which has been made authoritative by high judicial approval : " Where the plaintiff has been compelled by law to pay, or, being com- pelled by law, has paid money which the defendant was ultimately liable to pay, so that the latter obtains the benefit of the payment by the discharge of his liability, under such circumstances the defendant is held indebted to the plaintiff in the amount " (x). Such a right to indemnity arises where one man's goods are lawfully seized for another's debt, e.g., as being liable to distress, and are redeemed by their owner ; the owner will be entitled to indemnity from the debtor, though he may have exposed his goods to the risk of distress by a voluntary act not done at the debtor's request or for his benefit (y). But the English authorities do not cover a case where the plaintiff has made a payment operating for the defendant's benefit, but was not under (f) The view propounded in the text Ex. 101, 104, and Vaughan Williams, L.J., was adopted by Stanley, C.J., in Tulsa in Banner's Case (last note) at p. 173. Kunwar v.JagesharPrasad (1906) 28 All. The learned author's words are altered in 563. the current edition of Leake on Contracts (M) Banner v. Tottenham, etc., Building (p. 43), but the sense is unaffected. Society [1898] 1 Q. B. 161, 167, per A. L. (y) Edmwids v. Walllngford (1885) 14 Smith, L.J. Q. B. Div. 811, disapproving England v. (a;) Adopted by Cockburn, C.J., in the Marsden (1866) L. R. 1 C. P. 529. Ex. Ch., Moule v. Garrett (1872) L. R. 7 288 THE INDIAN CONTRACT ACT. S. 69. any direct legal duty to do so, nor where the defendant >vas not bound to pay, though the payment was to his advantage. The assignee of a term of years mortgaged the premises by sub-lease. The mortgagees took possession, but did not pay the rent due under the principal lease. The original lessees, who of course remained liable to the lessors, had to pay the rent, and sued the mortgagees to recover indemnity. It was held that the action did not lie (2), for there was no obligation common to the plaintiff and the defen- dant. It was to the mortgagees' interest that the rent should be paid, but no one could call on them to pay it. This case, it would seem, would be decided in the same way under the present section. The words " bound by law to pay," as they fix the limit of the law in India, mark the point beyond which the Court of Appeal refused to extend it in England. " Person . . . interested in the payment of money." This section only applies to payments made bond fide for the protection of one's own interest. A person may be interested in the payment, but if in making the payment he is not actuated by the motive of protecting his own interest, he cannot recover under this section (a). Thus where A. pur- chases property from B., but the sale Is fictitious, A. cannot recover from B. money paid by him to save the property from being sold in execution of a decree against B. (b). But a putnidar who makes payments on account of Government revenue due by his superior landlord, who had failed to pay the same, is entitled to recover under this section, even though the risk to his putni may be remote, provided he had some interest in making the payment (c). Similarly, where A.'s property is wrongfully attached in order to realise arrears of Government revenue due by B., and A. pays the amount to save his property from sale, he is entitled to recover the amount from B. (d). It is enough for a person claiming under the provisions of this section (2) Banner's Case [1898] 1 Q. B. 161, Mufassal). Cp. Ajudhia Prasad v. Bakar 167. Sajjad (1883) 5 All. 400, cited in the () See Desal Himatsingji v. Bhava- commentary on s. 70. bhai (1880) 4 Bom. 643, at p. 652. (d) Ttdsa Kunwar v. Jageshar Prasad (J) Janki Prasad Singh v. Baldeo (1906) 28 All. 563; Khushal Singh v. Prasad (1908) 30 All. 167. Khawanl (1906) All. W. N. 282. The (c) Smith v. Dinonath (1885) 12 Cal. decision in Chunia v. Kundan Lai (1882) 213 ; Bama Sundari JDasi v. Adhar All. W. N. 149, 150, where it was held Chunder (1894) 22 Cal. 28. And see that a vendor, who had paid under com- Nath Prasad v. Baij Nath (1880) 3 All. pulsion arrears of revenue payable by 66 ; and Krishna Kamini Chowdhrani v. the purchaser, was not entitled to recover Oopi Mohun (1888) 15 Cal. 652 (where from the purchaser, cannot now be sup- the point actually decided was that cases ported, having regard to the decisions in falling within ss. 69 and 70 are cognisable the above cases, by a Court of Small Causes in the PERSONS INTERESTED IN PAYMENT. 289 to show that he had an interest in paying the moneys claimed by him at S. 69. the time of the payment. Thus moneys paid by a person while in possession of an estate under a decree of a Court to prevent the sale of the estate for arrears of Government revenue may be recovered by him under this section, even though the decree may be subsequently reversed and he may be deprived of possession (e). In the case now cited the Judicial Committee said : "It seems to their Lordships to be common justice that when a proprietor in good faith pending litigation makes the necessary payment for the preservation of the estate in dispute, and the estate is afterwards adjudged to his opponent, he should be recouped what he has so paid by the person who ultimately benefits by the payment if he has failed through no fault of his to reimburse himself out of the rents " (/). Conversely, payment of kist made by a person who had obtained a decree for possession of certain lands may be recovered back by him, though the payment may have been made when he was not yet put into possession pending an appeal and a second appeal (g). Similarly, moneys paid by a mortgagee of a putni tenure to save the tenure from sale for arrears of rent pending bond fide litigation between him and his mortgagor relating to the amount of the mortgage debt may be recovered back under the provisions of this section, even though it may be eventually found by the Court that the whole of the mortgage debt was as a matter of fact satisfied before the date of payment (h). In a still later case (i) the plaintiff purchased a putni taluk at a sale held under Regu- lation VIII of 1819 at the instance of the zamindar for non-payment of rent by putnidars. The sale was set aside in May, 1894, in a suit brought by the putnidars for the purpose against the zamindar and the plaintiff. The zamindar alone appealed against the decision, and pending the appeal the zamindar called upon the plaintiff to pay rent that had accrued from April, 1894, to November, 1894. The plaintiff thereupon paid the rent, and in a suit by him against the putnidars it was held that he was entitled to be reimbursed the amount by them. The fact that the decision of the first Court was in favour of the defaulting putnidars did not affect the plaintiff's right to pay the rent, as it was quite possible that that decision might have been reversed on appeal. But a person in wrongful possession of land making payment of Government revenue is not interested within the meaning of this section (,/). In a recent Madras case a Hindu mother incurred expenses for her daughter's marriage, and claimed to recover them (e) Dakkina Mohan Roy v. Saroda (/<) Bindnbas/tini Dassi v. Harendra Mohan Hoy (1893) 21 Cal. 142, 20 L. R. Lai Roy (1897) 25 Cal. 305. Ind. Ap. 160. (i) Radha Maclhub Samonta v. Sasti (/) 21 Cal. at p. 148. Ram Sen (1899) 26 Cal. 826. (//) Chlnnastamy v. Rvthnasabajtath y . (j) Bhida Kuar v. Bhondu Das (1885) (1903) 27 Mad. 338. 7 All. 660. i.c. 19 290 THE INDIAN CONTRACT ACT. S. 69. from the undivided brother of her deceased husband, who had got the family property in his hands, and had improperly refused to perform the marriage ceremony. It was held that she was under the Hindu law entitled to recover the expenses, the Court intimating at the same time that she was a person interested in making the payment within this section (&). In Ram Tuhul Singh v. Biseswar Lai (I) the Judicial Committee, in dealing with the rights of parties making payments, observed : " It is not in every case in which a man has benefited by the money of another that an obligation to repay that money arises. The question is not to be con- cluded by nice considerations of what may be fair and proper according to the highest morality. To support such a suit there must be an obligation express or implied to repay. It is well settled that there is no such obligation in the case of a voluntary payment by A. of B.'s debt." Thus a mortgagor who voluntarily pays the assessment on land mortgaged by him, forestalling the mortgagee in possession, who, it is found, was willing to pay the assessment as he had done for years past, is not entitled to recover from the mortgagee the amount so paid by him (m). Similarly, payment made by a mortgagee to prevent the sale of the mortgaged pro- perty in execution of a decree against the mortgagor cannot be recovered from the mortgagor, if the mortgage was prior to the execution proceed- ings (>). And where A., B.'s nephew, believing that he was the heir of B., paid the amount of a decree held by C. against B. to prevent the sale of B.'s property, and it was subsequently declared in a suit that A. was not B.'s heir, it was held by the High Court of Allahabad that the payment made by A. was a purely voluntary and gratuitous one, and as such could not be recovered (nri). This decision does not appear to be in accord with later decisions of the same Court (nnri). Suit for contribution. Whether this section applies to a suit for contribution where loth the plaintiff and the defendant were liable for the money paid by the plaintiff is not clear on the authorities (o). In Mothooranath v. Kristokumar (p), where portions of a property subject to a mortgage were purchased by the plaintiff and the defendant respectively, and the plaintiff alone paid the entire amount of the mortgage debt to prevent the estate from sale, it was held by the Calcutta High Court that (jfc) Vaikuntam v. Kallapiram (1900) () Sumar Singh v. Shib Lai (1882) 3 Mad. 512 ; ib. (1902) 26 Mad. 497. All. W. N. 149. (0 (1875) 23 W. R. 305 ; 15 B. L. R. (nun) Khuslial Singh v. Khawani (1906) 208 ; L. R. 2 Ind. Ap. 131. All. W. N. 282 ; Tttlaa Kunwar v. Jage- (;) Ramchandra Atmaram v. Damodar s/iar Prashad (1906) 28 All. 563. Ramchandra (1899) 1 Bom. L. R. 371. (o) As to contribution between joint pro- () Ram Prasad v. Salik Ram (1882) misors and co-sureties, see ss. 43 and 146. All. W. N, 210. (jO (1878) 4 Cal. 369. PAYMENT OF MONEY DUE BY ANOTHER. 291 the plaintiff was a person interested in the payment within the meaning of S. 69. this section, and that he was entitled to contribution from the defendant. In a subsequent case the same High Court doubted whether a suit for contribution in respect of money for which the plaintiff and the defendant in the contribution suit had been made jointly liable by a former decree fell within the scope either of this or the next following section (q). The Court was inclined to think that those sections seemed rather to contem- plate persons who, not being themselves bound to pay the money or to do the act, did it under circumstances which gave them a right to recover from the person who had allowed the payment to be made and had benefited by it. In a still later case (r), where one co-sharer of land sued another co-sharer for contribution for rent of the land paid by him, it was held that the plaintiff was not entitled to recover under this section, as the defendant was wrongfully kept out of possession by the plaintiff. But for that circumstance, it was said, contribution could have been recovered. The Court observed : " It seems to us that the provisions of s. 69 of the Indian Contract Act, upon which the plaintiff founds his right of suit, are not applicable to such a suit as the present. That section, we think, con- templates a case in which there are several co-sharers in possession of land and where some of them having neglected to pay what is due from them in respect of the occupation of the land, one of their number pays what is due from all. He may then recover contribution from the rest. But here the plaintiff sues to recover expenses which he had by the wrongful appropriation of the profits of the defendant's share already received." In a Madras case (s), which turned upon the construction of s. 69, it was stated in the course of the judgment that "s. 69 and the cases on which it is founded (see Moule v. Garrett () ) make it clear that a payment made by a party interested may be recovered, and it would be inconsistent to hold that services done would not equally give a right of action." " Money which another is bound by law to pay." In Mothooranath v. Kristokumar (u), above cited, it was contended that this section applied only to cases where the person who is there called " the other " was personally liable for the debt, and that it did not apply where, as in that case, the liability attached to the land. The Court overruled this (?) Futteli AH v. Gunganath Roy Boy (1902) 6 C. W. N. 903. (1881) 8 Cal. 113, 116. No reference was (.<) Damodara Mudallar v. Secretary of made in the. judgment to the case cited State for India (1894) 18 Mad. 88, 92, above. See also Nawab Mir Kamaludin cited in the commentary on s. 70. v. Partap Mota (1880) 6 Bom. 244, where (0 L. R. 5 Ex. 132 ; on appeal L. R. it was held that the section did not 7Ex.l01. apply. () (1878) 4 Cal. 369. (r) Swarnamoyee Debt v. Harl Das 192 292 THE INDIAN CONTRACT ACT. S. 69. contention and said : " It is clear from the illustration that that is not the intention of the Legislature. The illustration gives the case of a lessee paying off revenue due to Government ; but the liability to pay revenue due to Government is not a personal liability of the zamindar, but a liability which is imposed upon the zamindar's land. It is therefore clear that that section was intended to include the cases not only of personal liability, but all liabilities to payments for which owners of lands are indirectly liable, those liabilities being imposed upon the lands held by them." "Bound by law." The liability for which payment may be made under this section need not be a statutory one. In a Calcutta case cited above (x) it was argued that the words " bound by law " restricted the section to liabilities created by some statute, such as liabilities to pay revenue, but excluded liabilities which arose out of contracts by parties. The Court declined to uphold this contention and observed : " That would be putting on the section far too narrow a construction, because it was no doubt intended to include such a case as a lessee paying rent to the superior landlord for which the intermediate lessee was liable under a covenant." An action to recover money paid is not maintainable under this section unless the person from whom it is sought to be recovered was bound by law to pay it. Thus revenue due on land owned by one who is not the registered holder is not money which such an owner is bound to pay under the Madras Revenue Recovery Act II of 1864, though it may be to his interest to do so, and the registered holder voluntarily paying such revenue cannot recover it under this section (y}. Similarly, payments made by a second mortgagee to save the mortgaged property from sale in execution of a decree for rent obtained by the zamindar against the mortgagor under the Bengal Tenancy Act cannot be recovered by him from the first mortgagee, as the latter is not bound under s. 69 of that Act to pay the rent due by the mortgagor to the zamindar (z). And where the income-tax authorities assessed the widow of a deceased Hindu in respect of outstandings forming part of the estate of the deceased, notwithstanding remonstrances on her part that the outstandings had not come to her, but had been bequeathed under the will of the deceased to the defendants, and the widow paid the tax, it was held that she could not recover the amount from the defendants under this section, for the defendants, not being the parties assessed, were not " bound by law " to pay the tax (a). In a recent Calcutta case, A. mortgaged his interest in a (x) MothooranatTiv.Kristoltumar(\%18) (z) Gangadas v. Jogendra (1907) 11 4 Gal. 369, 373. C. W. N. 403. (y) Boja Sellappa Reddy v. Vrid- (a)RaglMi-anv.AlameluAmmal(\W~) Reddy (1907) 30 Mad. 35. 31 Mad. 35. PAYMENT OF MONEY DUE BY ANOTHER. 293 patni taluk to K. A. then sold his interest in the taluk to B., who got S. 69. his name registered in the zamindar's books in place of A. Subsequently the zamindar threatened to sell the taluk for arrears of rent, where- upon K. paid the amount to save his interest in the taluk. K. then sued B. to recover the amount from B. B. contended that he was only a benamidar for A., and that he was not therefore bound to pay the rent. But this contention was overruled, and it was held that, B. having held himself out as a purchaser, he was primd facie bound to pay the rent, and that K. was entitled to recover the amount from him under this section (&). The person making the payment must not himself be under a legal liability to pay. This section contemplates a case where the person who makes the payment is under no legal liability to pay it, and he pays the money for another person who is bound in law to pay. If the person who makes the payment is himself under a legal liability to pay, he cannot recover under this section. Thus the purchaser of a patni taluk at a sale in execution of a decree against the holder thereof is bound by law to pay all arrears of rent due to the zamindar at the time of sale. If the purchaser pays the arrears to save the taluk from sale at the instance of the zamindar, he cannot recover the amount from the patnidar, though the patnidar enjoyed the profits of the patni during the period for which the rent had become due (c). Similarly, a person who buys immovable property subject to a charge for maintenance in favour of a widow cannot recover from the vendor maintenance money paid by him to the widow to save the property from sale at the instance of the widow (d). Payment must be to another person. This section applies only where one person pays to another money which a third party is bound to pay. In The Secretary of Stale for India v. Fernandes (e), there was certain land in South Canara which was held by the Government at a certain rent as mulgaindar (permanent tenant) under a mulgar (landlord). Arrears of revenue were due from the mulgar to Government, and the Government, to prevent the land from being sold for the arrears, paid as mulgaindar or rather retained the arrears due to itself. It was held that, having made the payment to itself, the Government could not recover the sum from the mulgar under this section. (b) Umcsh Chandra Banerjee v. Khulna (cT) Mangalathammal T. Narayana- Loan Company (1907) 34 Cal. 92. swami Aiyar (1907) 17 Mad. L. J. 250. (c) Manindra Chandra Nandy v. (e) (1907) 30 Mad. 375. This was not Jamahir Kumari (1905) 32 Cal. 643. the only disputable point, but the case Compare Kishan Lai v. Megh Singh was disposed of on it. 1901) All. W. N. 37. 294 THE INDIAN CONTRACT ACT. S. 70. 70. Where a person lawfully does anything for obligation of another person, or delivers anything to him, ESSt o?nJli" g not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. Illustrations. (a) A., a tradesman, leaves goods at B.'s house by mistake. B. treats the goods as his own. He is bound to pay A. for them. (b) A. saves B.'s property from fire. A. is not entitled to com- pensation from B. if the circumstances show that he intended to act gratuitously. Non-gratuitous act done for another. This section goes far beyond English law (/). By the Common Law, if goods, work, or anything valuable be offered in the way of business and not as a gift, the acceptance of them is evidence of an agreement a real, not a fictitious, agreement, though it need not be expressed in words to pay what the consideration so given and taken is reasonably worth. A man is not bound to pay for that which he has not had the option of refusing. Under this section it would seem that whoever finds and restores lost property, apart from any question of a reward having been offered, is entitled to compensation for his trouble if he did not intend to act gratuitously. This is certainly not the Common Law rule. Illustration (b) is in accordance, no doubt, with English law, so far as the negative result goes ; but the only real analogy is to be found in the maritime law of salvage and in some other very rare cases depending on the same principle. The case of illustration (a) would be decided in the same way, but not quite for the same reason. Either B. has accepted the goods, in which case he cannot be heard to say that they were not intended for him, or he has dealt with them as a mere trespasser, in which case he is liable for their value as damages. This does not apply to the rare but possible case of B. honestly thinking that the goods came from X., of whom he intended to buy such goods. It seems that such a case is within the present section, but by the Common Law B. is not liable to A. for the price of the goods (g). " Certainly, there may be difficulties in applying a rule stated in such wide terms as is that expressed in section 70. According to the section it is (/) This was recognised in Jarao (g} Boulton v. Jones (1857) 2 H. & N. Kuniari v. Basanta Kumar Roy (1905) 564. 32 Cal. 374, at p. 377. NON-GRATUITOUS ACT. 295 not essential that the act shall have been necessary in the sense that it has S. 70. been done under circumstances of pressing emergency, or even that it shall have been an act necessary to be done at some time for the preservation of property. It may therefore be extended to cases in which no question of salvage enters. It is not limited to persons standing in particular relations to one another, and, except in the requirement that the act shall be lawful, no condition is prescribed as to the circumstances under which it shall be done " (/O- An equitable principle resembling that of this section is recognised in the English law of partnership and companies. Where money has been borrowed by one partner in the name of the firm, but without the authority of his co-partners, and applied in paying debts of the firm, the lender is entitled to call on the firm for repayment of the amount so applied (*'). The rule is treated as somewhat peculiar, and is not likely to be extended. The rule laid down in this section was suggested by the notes to Lampleigh v. Brathivait (&), and perhaps indirectly by the Roman law (I) (see Whifcley Stokes, Introduction to Contract Act, at p. 533). By this section three conditions are required to establish a right of action at the suit of a person who does anything for another: (1) the thing must be done lawfully; (2) it must be done by a person not intending to act gratuitously ; and (3) the person for whom the act is done must enjoy the benefit of it. Thus in Damodara Mudaliar v. Secretary of State for India (m) eleven villages were irrigated by a certain tank, some of which were zamindari villages, and others were held under Government. The Government effected certain repairs necessary for the preservation of the tank, and it was found that they did not intend to do so gratuitously for the zamindars, and that the latter had enjoyed the benefit thereof. The zamindars were under the circumstances held liable to contribute to the expenses of the repairs (ri). Similarly, where a notice was issued upon the owners of a hat by the municipality to effect certain improvements, intimating that failure to comply with the notice would lead to a with- drawal of the licence granted for holding the hat, and one of the co-sharers (/<) Damodara Mudaliar v. Secretary of () It was not found in the case that State for India (1894) 18 Mad. 88, at p. 91. there was any request express or implied (i) Lindley, Partnership, 6th ed. 201 ; on the part of the zamindars to the cp. Partnership Act, 1890, s. 24, sub.-s. 2. Government to execute the repairs, though (k) 1 Smith L. C., 10th ed. 136. the Court expressed the opinion that if (Z) Per Cur. in Damodara Mudaliar the facts were properly ascertained a v. Secretary of State for India (1894) 18 request might have been implied : see 18 Mad. 88, 91. Mad. at p. 90. (i) (1894) 18 Mad. 88. 296 THE INDIAN CONTRACT ACT. S. 70. effected the required improvements, it was held that he was entitled to contribution from the other co-sharers (0). Upon the same principle, where a mortgagee threatened to sell the land mortgaged to him, and one of the co-sharers paid up the mortgage debt to prevent the property from being sold, it was held that he was entitled to contribution from the other co- sharers (//) But a co-heir is not bound to contribute towards the expenses of litigation incurred by other co-heirs in respect of the common property, though the litigation may have been carried on bona fide, and though he may have benefited by the litigation (q). A mortgagee of immovable property can recover from the mortgagor payments made by him for road and public works cesses payable by the mortgagor (r). And so where the holder of an inain within a zamindari takes for his benefit Government water, and the zamindar, who is liable in the first instance to pay to the Government the cess for the water so taken, pays the same, he can recover the amount of cess so paid from the inamdar (s). "Lawfully." By the use of the word "lawfully" in this section the Legislature had in contemplation cases in which a person held such a relation to another as either directly to create or reasonably to justify the inference that by some act done for another person the person doing the act was entitled to look for compensation to the person for whom it was done (). A payment made by a person fraudulently and dishonestly with the intention of manufacturing evidence of title to land which belonged to the defendant, and to which he knew he had no claim, is not lawful within the meaning of this section (). In such a case it is clear that the payment could also not be regarded as having been made for the defendant. Similarly, where a purchaser of property, the sale being fictitious and so found by the Court in a previous litigation, paid the amount of a decree obtained by a third party against his vendor to prevent the property from being sold in execution, it was held that the payment was not " lawfully " made, and that the purchaser could not recover it from the vendor (.r). (0) Jarao Kumarl v. Basanta Kumar (f) Chedi Lai v. Bhagwan Das (1888) Roy (1905) 32 Cal. 374. 11 All. 234, 243; see Gordhanlal v. (^) Khairat Husainv. Haidri Begam Darbar S/iri Surajmalji (1902) 26 Bom. (1888) All. W. N. 10. 504, 518. (q) Abdul Wahid Khan v. Shaluka () Desal Himatsingji v. Bhacalhai Bibi (1894) 21 Cal. 496, L. R. 21 Ind. Ap. (1880) 4 Bom. 643, 653. 26 ; Halinia Bee v. Roshan Bee (1907) (#) Jankl Prasad Singh v. Baldeo 30 Mad. 526. See also Jyani Begam v. Prasad (1908) 30 All. 167. In this case Umrav Begam (1908) 32 Bom. 612. the Court thought that the payment was (r) Upendra Chandra Mitter v. Tara possibly made with some sinister object. Prosanna Mukerjee (1903) 30 Cal. 794. Contrast MurUdhar v. B/tikhi (1885) All . (*) Rajah of Venkatagiri v. Vudutha W. N. 219 ; Mohar Singh v. Sher Singh Subbarayudu (1907) 30 Mad. 277. (1883) Punj. Rec. no. 42. NON-GRATUITOUS ACT. 297 " Does." This expression includes payment of money. It must not S. 70. be supposed that because s. (>!) provides for the case of payment of money, therefore the present section excludes that case. There may be cases in which a person who is bound to pay a certain sum of money would not necessarily be benefited by its payment by another. Those cases would fall under s. 69, for benefit received by the payment of money is one of the conditions necessary to the application of this section (y). "For another person." The principle underlying this section was adopted in a Calcutta case(0) decided in 1881, but without any reference to the Contract Act. In that case the plaintiffs, bona fide believing that they were the owners of a four annas share and that the defendants were the owners of the remaining twelve annas share in a putni, paid to the zamindar their share of the revenue. In a suit between the parties it was declared that the plaintiffs had no share in the putni, and that the defendants were entitled to the whole of it. Subsequently the defendants paid to the zamindar the revenue on the twelve annas share only, availing themselves of the payment by the plaintiffs. It was held that upon those facts the plaintiffs were entitled to recover from the defendants the amount paid by them, on the principle that " where a payment is made by one person for the benefit of another, and that other afterwards adopts that payment and avails himself of it, the sum becomes money paid for his use." But payment made against the will of the defendant and in the course of a transaction which in one event would have turned out highly profitable to the plaintiff and extremely detrimental to the defendant could not be said to have been made for the defendant, though in the event which took place it may have proved beneficial to him (a). Similarly payment of revenue by the plaintiff while in wrongful possession of the defendant's land and for his own benefit and his own account could not be recovered under this section (&). And it has been held that if A. is assessed by the income-tax authorities and protests that B. is the party properly liable, but pays the tax, A. cannot recover the amount from B., for A. cannot be said to have made the payment " for " B. (c). It is not clear whether the expression "another person" includes a minor. There (y) Smith v. Dhionath (.1885) 12 Cal. Tara Prosanna (1903) 30 Cal. 794. 213, 217 ; Desai Hlmats'mgji v. Bharabhai (a) Ram Tufiul Singh v. Biseswar Lai (1880) 4 Bom. 643 ; Nath Frasad v. Baij (1875) 23 W. R. 305, 15 B. L. R. 208, A'ath (1880) 3 All. 66 ; Xobin Krishna L. R. 2 Ind. Ap. 131. Base v. JUott Mohun Base (1881) 7 Cal. (*) Binda Kuar v. Bhonda Das (1885) 573. 7 All. 660. (r) Not in Krishna Bose v. Man Moliun (c} Ragharan\.AlameluAmmal(\^Q7) Base (1881) 7 Cal. 573 ; Smith v. Dinonath 31 Mad. 35. (1885) 12 Cal. 213 ; Upendra Chandra v. 208 THE INDIAN CONTRACT ACT. Ss. 70, 71. are no cases in point (d), but there seems to be no reason why on principle the expression should not be interpreted as comprising the case of a minor (e). The following general caution should be noted : " The section ought not to be so read as to justify the officious interference of one man with the affairs or property of another, or to impose obligations in respect of services which the person sought to be charged did not wish to have rendered "(/). "Gratuitously." See for illustrations Ajudhia Prasad v. Bakar Sajjad(g], Bama Sundari Dasi v. Adhar Chunder Sarkar(h\ and Nathu v. Balwantrao (i). 71. A person who finds goods belonging to another, Responsibility of an ^ takes them into his custody, is subject to finder of goods. the game responsibility as a bailee. Liability of finder. The position of a finder in English law, especially with regard to the possibility of his stealing the thing found, has been the subject, of many and subtle distinctions. It does not appear useful or desirable to say anything of them here, as it was plainly the object both of the Penal Code and of the Contract Act to get rid of them. Any one who is curious in the matter may be referred to the late Mr. Justice Wright's full discussion of it in relation to the law of theft (&). The Indian Penal Code (s. 403, Explanation 2) provides as follows : "A person who finds property not in the possession of any other person, and takes such property for the purpose of protecting it for, or of restoring it to, the owner, does not take or misappropriate it dishonestly, and is not guilty of an offence ; but he is guilty of the offence above defined [criminal misappropriation of property] if he appropriates it to his own use when he knows or has the means of discovering the owner, or before he has used reasonable means to discover and give notice to the owner, and has kept the property a reasonable time to enable the owner to claim it. " What are reasonable means, or what is a reasonable time in such a case, is a question of fact. (d~) In Venkata v. Timmayya, (1898) (/) Damodara Mudaliar v. Secretary 22 Mad. 314, it was held that, assuming of Statefor India (1894) 18 Mad. at p. 93. the section applied to the case of a minor, (#) (1883) 5 All. 400. it did not apply under the particular cir- (ft) (1894) 22 Gal. 28. cumstances of the case. See also Branson (/) (1903) 27 Bom. 390, 393. v. Appasami (1894) 17 Mad. 257. (&) Pollock and Wright on Possession, (e) Whitley Stokes, Anglo-Indian Codes, 171 sqq. vol. i. 585, note 3. PAYMENT MADE BY MISTAKE. 299 " It is not necessary that the finder should know who is the owner of Ss. 71, 72. the property, or that any particular person is the owner of it ; it is sufficient if at the time of appropriating it he does not believe it to be his own property, or in good faith believe that the real owner cannot be found." As to the definition of " bailee " see s. 148, below. Liability of per- y% ^ person to whom money has been son to whom money * If P. aid ' r v thin g paid, or anything delivered, by mistake or delivered, by mis- * take or under under coercion, must repay or return it. coercion. Illustrations. (a) A. and B. jointly owe 100 rupees to C. A. alone pays the amount to 0., and B., not knowing this fact, pays 100 rupees over again to C. C. is bound to repay the amount to B. (b) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive. Payment under mistake of fact or mistake of law. The rule of the Common Law is that " money paid under mistake or ignorance of fact may be recovered back where the supposed state of fact is such as to create a liability to pay the money, which in reality is not due," but " a payment made under the influence of a mistake which does not create a supposed legal obligation, and which, therefore, as regards the motive of the party, is voluntary, cannot be recovered back" (I). In other words, the mistake is material only so far as it leads to the payment being made without consideration, and a wrong reason not affecting the substance of the transaction itself is not a failure of consideration (m). Probably this holds in British India (ri). Mistake of law is not expressly excluded by the words of this section ; but s. 21 shows that it is not included. "The man who has chosen to judge his own cause upon all the facts, and has decided against himself, (Z) Leake, 63, 64. Kaur (1906) Punj. Rec. no. 131. It must (//(>) Balfour v. Sea Fire Assurance be assumed that the circumstances were (1857) 3 C. B. N. S. 300. such as to prevent the mistake from being () Where a lessee, on the lessor's death, a mere mistake of law. But where money pays rent to the lessor's widow, erroneously is paid voluntarily with a full knowledge believing that the rent was payable to of all the facts, it cannot be recovered on her, and he has to pay the rent over again the ground that the payment was mndo to the lessor's executors, he is entitled to under a mistake of fact : Pertab Singh v. a refund of the amount paid by him to The Secretary of State (1876) Punj. Rec. the widow : Ham Kishen v. Rani Bhagwan no. 94. 300 THE INDIAN CONTRACT ACT. S. 72. cannot appeal to the Court against his own judgment, whether it was well informed or not " (0). Thus payment made by A. to B. upon a miscon- struction of the terms of a lease cannot be recovered back ( p ). A debtor may recover from a creditor the amount of an over-payment made to him if it was made by mistake^). Similarly a bonafide payment of money by a Treasury officer, under the imposition of gross fraud, to the defendant, who was the innocent agent of the person who contrived the fraud, may be recovered back from him though the defendant may have paid the money to the principal (;). Involuntary payment. A payment made under coercion is an in- voluntary payment. But a payment may be involuntary though made otherwise than under coercion; and though the present section does not deal with such cases, the Act is no bar to the recovery of the payment (s). The section in no way affects the principle of law that, where the defendant has received money which in justice and equity belongs to the plaintiff under circumstances which render a receipt of it a receipt by the defendant to_Jhe_use_of_the plaintiff, the plaintiff is entitlecTto recover (fj. Thus where the plaintiff purchased certain property in execution of a decree, and the defendant, who held a decree against the former owner of the property, proceeded to execute it against the same property, and the plaintiff paid the amount of the defendant's decree into Court, it was held that he was entitled to recover back the amount, as the payment was involuntary (it). In Fatima Khatoon v. Mahomed (x), the plaintiffs, who were Mahomedan ladies, were entitled to a charge on certain property in respect of their dower. The defendants, who were holders of a decree against the heirs and representatives of the person to whom the property belonged, obtained leave in execution proceedings to sell the property. In order to prevent that sale, which would have been injurious to them, the plaintiffs paid under protest the amount of the defendants' decree into Court. In a suit to recover back the amount it was held by the Judicial (0) Pollock, Law of Fraud in British (1901) 25 Mad. 548. India, p. 128. () 16 Cal. 656. The Court also (p) Khozan Sing v. The Secretary of observed : " We are not prepared to say State (1878) Punj. Rec. no. 33. that the defendant's conduct did not (if) Sadr-un-nisa v. Muhammad Jan amount to a ' detainer of the plaintiff's (1880) 2 All. 671, 674. property to the prejudice of the plaintiff () Shugan Chand v. The Government with the intention of causing him to enter A 'ort/i- Western Provinces (1875) 1 All. 79, into an agreement,' viz. an agreement to following 2'wgman v. Hopkins, 4 Man. & pay the debt of a third person" (at G. 389. p. 665). (*) Jug deoNarain Singh v. Rajah Singh, (#) (1868) 12 M. I. A. 65 ; S. C., 10 (1888) 15 Cal. 656. W. R. P. C. 29. (Q Narayansami v. Osuru Jteddi PAYMENT MADE UNDER COERCION. 301 Committee that the payment was made "not voluntarily, but under a S. 72. species of compulsion," and that they were, therefore, entitled to a decree. And in a subsequent case it was held by the same tribunal that a payment made by the purchaser of a property to prevent its sale in execution of a decree obtained by a mortgagee whose debt had been satisfied can be recovered back, as it was made "under force of these execution pro- ceedings " (y}. It will be noted that the payment made in the above cases was made to prevent the sale. But where property belonging to A. has been sold in execution of a decree against B., and A. has the sale set aside by making a deposit under s. 310A of the Civil Procedure Code (now 0. 21, r. 89), A. is not entitled to recover the amount paid from the decree-holder (0). Similarly, where a zamindar claimed and realised from a tenant a sum of money equivalent to a fourth share of the price of trees cut down and sold by the tenant, basing his claim on general usage, the tenant may recover the amount as money had and received by the defendant for the plaintiffs use (a). Wrongful payment. There is a class of cases which, though not directly bearing on this section, may be conveniently dealt with in this place. They are cases where money is paid in execution of a decree, and it is sought to recover back the amount on the reversal of the decree. In such a case the payment, though in the first instance lawful, becomes wrongful on the reversal of the decree (b). The rule of law on this subject is that money paid under a decree cannot be recovered back in a fresh suit whilst the decree remains in force. But if the decree is reversed or superseded the amount paid under it is recoverable. And it has been held in effect by the Judicial Committee that a decree will be deemed to be superseded, though not actually reversed, if it was made pending an appeal to a higher Court from an antecedent decree on the same cause of action, and the latter decree is reversed by the appellate Court, and the order of reversal was intended to deal with all the rights and liabilities of the parties under it(c), the principle being that where (y) Dulichand v. RamMshen Singh Court of Small Causes as being a suit for (1881) 7 Cal. 648 ; S. C. L. R. 8 Ind. Ap. 93. money which had come into the hands of (z) Kunja Beliari Singha v. Bhupendra the defendant under such circumstances Kumar Dutt (1908) 12 C. W. N. 151. A.'s that he must be taken to hold it to the proper remedy was to institute a regular use O f the plaintiff. suit for a declaration of his title, and not (j) p er Cur., Jogesh Chunder Dutt v. to make a deposit under s. 310A of the Kali Churn Dutt (1877) 3 Cal. 30, 38. Code. (c) Shama Purshad Roy v. Hurro () Collector of Cawnpore v. Kedari Purshad Rinj (1865) 10 M. I. A. 203, (1881) 4 All. 19. The actual point decided followed by a majority of the full Bench was that the suit was cognisable by the in Jogesh Cltunder Dutt v. Kali Churn 302 THE INDIAN CONTRACT ACT. Ss. 72, 73. the main decree which is the basis of subsequent decrees is reversed the latter decrees, being subordinate and dependent decrees, are superseded (d). See Code of Civil Procedure, 1908, s. 140. Compare s. 86 of the Transfer of Property Act, which provides that where property is transferred in pursuance of a contract which is liable to rescission, or induced by fraud or mistake, the transferee must, on receiving notice to that effect, hold the property for the benefit of the transferor subject to repayment by the latter of the consideration actually paid. CHAPTER VI. OF THE CONSEQUENCES OF BREACH OF CONTRACT. 73. When a contract has been broken, the party who Compensation for suffers by such breach is entitled to receive, caused bybreach ^ rom ^ e party who has broken the contract, of contract. compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. When an obligation resembling those created by contract has been incurred and has not been discharged, Compensation for failure to discharge any person injured by the failure to discharge obligation . . . , . resembling those it is entitled to receive the same compensation created by contract. *, * from the party in default as if such person had contracted to discharge it and had broken his contract. Explanation. In estimating the loss or damage arising from a breach of contract, the means which existed of Dutt (1877) 3 Cal. 30. In the former of give a right for the recovery of the these cases there were several decrees for amount paid under them, interest on a bond, in the latter for (d) (1877) 3 Cal. 30,37, 38. See Kisheu enhanced rent. The reversal of one of Sahai v. Balthtawar Singh (1898) 20 All. those decrees by the Privy Council was 237, where it was held that there was no held to have superseded all other decrees such supersession of the decrees as in the obtained during the pendency of the Privy Council cases cited above, appeal to the Queen in Council, so as to DAMAGES FOR BREACH OF CONTRACT. 303 remedying the inconvenience caused by the non-performance S. 73. of the contract must be taken into account. Illustrations. (a) A. contracts to sell and deliver 50 maunds of saltpetre to B. at a certain price, to be paid on delivery. A. breaks his promise. B. is entitled to receive from A., by way of compensation, the sum, if any, by which the contract price falls short of the price for which B. might have obtained 50 maunds of saltpetre of like quality at the time when the saltpetre ought to have been delivered. Note. Generally it is "quite settled that on a contract to supply goods of a particular sort, which at the time of the breach can be obtained in the market, the measure of the damages is the difference between the contract price and the market price at the time of the breach." But the subject- matter of the contract may not be marketable. In that case the value must be taken as fixed by the price which actually has to be paid for the best and nearest available substitute : Hinde v. Liddell (1875) L. R. 10 Q. B. 265, 269 ; ElUnger Actien-Gesellschaft v. Armstrong (1874) L. R. 9 Q. B. 473, 476. Again, if the buyer, after giving the seller time at his request, finally has to go into the market and buy at an advanced price, he may recover the whole difference between the contract price and the price he actually paid : Ogle v. Earl Vane, Ex. Ch. (1868) L. R. 3 Q. B. 272. " The defendant, in effect, bought forbearance, and must pay for it " : Willes, J., at p. 280. " Obviously value created for special purpose is irrelevant, and it is for this reason that the prices made by bulls and bears are of no use to us. If the market value is uncertain, then we must have recourse to such surrounding circumstances as affect the probabilities, and among them to real prices proved about the time of due date. Now market price is to a great extent based on, and made up of the views of, those engaged in a particular business and familiar with its incidents. These views are based not only on transactions in which a man may himself have been actually engaged, but also on the general rumour and reputation in the market. Therefore, a man may be a competent witness for the purpose of testifying to market value, though he may not himself have been engaged in or carried through any dealing in the market at the particular date in question. We cannot then exclude from consideration any evidence on this point merely because the deponent may not himself have bought or sold on the due date " (e). [A. agrees to purchase B.'s house at Rs. 5,500. A. afterwards refuses (e) Shridhan Gopinath v. Gordhandas In the first sentence " purpose " appears Gokuldas (1902) 26 Bom. 235, at p. 239, to be a misprint for "purposes." 304 THE INDIAN CONTRACT ACT. S. 73. to complete the purchase. The house is then sold by auction in execution of a decree against B., and realises Rs. 3,100 net. B. is entitled to receive from A. by way of compensation Rs. 2,400 : Hohunlal Tribhoivandas v. Chunilal Httrinarayan (1902) 4 Bom. L. R. 814. Where the defendant contracted to deliver to the plaintiff at Bombay 1,000 tons of a certain species of coal from February to June, and failed to deliver any of the coal, and no purchase was made by the plaintiff against the defendant's contract, and there was practically no coal in Bom-bay of the description contracted for at the dates at which delivery should have been given, the Court received in evidence a statement produced by the plaintiff showing the rates at which he had during the contract period settled certain contracts for the same coal with other persons, to ascertain the actual value of the coal on the dates of the breach : Jagmohundas v. Nusswwanji (1902) 26 Bora. 744.] (b) A. hires B.'s ship to go to Bombay, and there take on board, on the first of January, a cargo which A. is to provide, and to bring it to Calcutta, the freight to be paid when earned. B.'s ship does not go to Bombay, but A. has opportunities of procuring suitable conveyance for the cargo upon terms as advantageous as those on which he had chartered the ship. A. avails himself of those opportunities, but is put to trouble and expense in doing so. A. is entitled to receive compensation from B. in respect of such trouble and expense. [Note. A. contracts with B. to provide a ship on a certain day to receive a cargo of coal to be carried to Havre. A. fails to provide the ship in time, and B. has to charter vessels at an advanced freight and also buy coal at a higher price. B. can recover from A. the increase of price as well as the increase of freight, unless A. can show that, by reason of a corresponding increase in the market price at tha port of delivery or otherwise, the loss is compensated wholly or in part : Featherston v. Wilkinson (1873) L. R. 8 Ex. 122.] (c) A. contracts to buy of B., at a stated price, 50 maunds of rice, no time being fixed for delivery. A. afterwards informs B. that he will not accept the rice if tendered to him. B. is entitled to receive from A., by way of compensation, the amount, if any, by which the contract price exceeds that which B. can obtain for the rice at the time when A. informs B. that he will not accept it. (d) A. contracts to buy B.'s ship for 60,000 rupees, but breaks his promise. A. must pay to B., by way of compensation, the excess, if any, of the contract price over the price which B. can obtain for the ship at the time of the breach of promise. (e) A., the owner of a boat, contracts with B. to take a cargo of jute to Mirzapur for sale at that place, starting on a specified day. DAMAGES FOR BREACH OF CONTRACT. 805 The boat, owing to some avoidable cause, does not start at the time S. 73. appointed, whereby the arrival of the cargo at Mirzapur is delayed beyond the time when it would have arrived if the boat had sailed according to the contract. After that date, and before the arrival of the cargo, the price of jute falls. The measure of the compensation payable to B. by A. is the difference between the price which B. could have obtained for the cargo at Mirzapur at the time when it would have arrived if forwarded in due course and its market price at the time when it actually arrived. [Note. There is not any general rule that damages cannot be recovered for Joss of market on a voyage by sea : " wherever the circumstances admit of calculations as to the time of arrival and the probable fluctuations of the market being made with the same degree of reasonable certainty in the case of a sea as of a land transit, there can be no reason why damages for late delivery should not be calculated according to the same principles in both cases " : Dunn v. JJucknall Bros. [1902] 2 K.B. 614, 622, C.A. per Cur., holding that the earlier decision of the C.A. in The Parana (1877) 2 P. Div. 118, had not laid down anything to the contrary. It must depend on the circumstances, including the character of the navigation undertaken, what amount of reasonable anticipation can be held practicable. Modern commerce tends to become more certain by sea no less than by land, and perhaps in a more marked degree.] (f) A. contracts to repair B.'s house in a certain manner, and receives payment in advance. A. repairs the house, but not according to contract. B. is entitled to recover from A. the cost of making the repairs conform to the contract. (g) A. contracts to let his ship to B. for a year, from the first of January, for a certain price. Freights rise, and on the first of January the hire obtainable for the ship is higher than the contract price. A. breaks his promise. He must pay to B., by way of compensation, a sum equal to the difference between the contract price and the price for which B. could hire a similar ship for a year on and from the first of January. (h) A. contracts to supply B. with a certain quantity of iron at a fixed price, being a higher price than that for which A. could procure and deliver the iron. B. wrongfully refuses to receive the iron. B. must pay to A., by way of compensation, the difference between the contract price of the iron and the sum for which A. could have obtained and delivered it. [Note. If the iron was to be delivered by instalments at certain dates, e.g. at the end of the three months of September, October, and November, the measure of damages is the sum of the differences between the contract and the market price of the several instalments on the respective final days for i.e. 20 THE INDIAN CONTRACT ACT. S. 73. performance: Brmvn v. Muller(lS72) L. R. 7 Ex. 319; and the same rule is applied where the seller, before the expiration of the whole time for performance, has refused to complete the contract, and the buyer has treated the refusal as an immediate breach (see pp. 220, 221, above), unless the seller can show that the buyer could have obtained a new contract on better terms : Roper v. Johnson(l873) L. R. 8 C. P. 167 ; cp. s. 120, below. Held similarly in India that if a vendor has a specified time allowed to him to deliver goods (the option was to deliver in August or September), and before the expiry of that time he gives notice to the purchaser that he will be unable to perform the contract, and the purchaser does not rescind the contract (as he may do under s. 39), the measure of damages is the difference between the contract price and the market price on the last day of the period limited (i.e., in this case the last day of September) : Mackertich v. Nobo Coomar Roy (1903) 30 Cal. 477, following Leigh v. Paterson (1818) 8 Taunt. 540, 20 R. R. 552. If the contract had been for delivery in August and September, semble the damages would have been distributable according to Brown v. Muller. A., a stockbroker, closes the account of a client, B., prematurely and without instructions, instead of carrying it over to the next settlement, as on the facts and the true construction of their agreement he ought to have done. B. informs A. that he insists on the performance of the contract. A. cannot claim to have the damages assessed with reference to the price of stocks at the date of closing the account, but B. is entitled to claim damages assessed according to the prices at the date fixed for performance ; qucere whether according to the highest price reached in the interval : Michael v. Hart & Co. [1902] 1 K. B. 482, C. A. With regard to several deliveries under one contract, where the defendant agreed with the plaintiff to purchase from him gunny bags, of which delivery was to be given at certain stated times, and the defendant failed to take delivery, it was held that the proper measure of damages was the difference between the contract price and the market price at the dates of failure by the defendant to take delivery : Cohen v. Cassim Nana (1876) 1 Cal. 264.] (i) A. delivers to B., a common carrier, a machine to be conveyed, without delay, to A.'s mill, informing B. that his mill is stopped for want of the machine. B. unreasonably delays the delivery of the machine, and A., in consequence, loses a profitable contract with the Government. A. is entitled to receive from B., by way of compensa- tion, the average amount of profit which would have been made by the working of the mill during the time that delivery of it was delayed, but not the loss sustained through the loss of the Government contract. REMOTENESS OF DAMAGE. 307 [Note. The facts in Hadley v. Baxendale 9 Ex. 341, 06 R. R. 742, s. 73. were somewhat like these, except that the defendants did not know that the plaintiffs' mill was stopped for want of part of the machinery which they were to supply. They were held not liable for loss of profit. It may be collected from the judgment that with knowledge they would have been liable. As to the general rule there laid down see the commentary below. The loss of profits on a contract of which the defendant had not notice is clearly too remote. But where the defendant failed to supply an essential part of a machine which the plaintiff, to his knowledge, was under contract to supply to a third person, and the plaintiff, by the defendant's default, lost the benefit of that contract, the defendant was held liable both for the loss of profit and for the plaintiff's charges in making other parts of the machine : Hydraulic Engineering Co. v. McHaffie (1878) 4 Q. B. Div. 670. B. delivers to A . several cases of machinery to be carried by sea from Bombay to Karachi for the purpose of building a mill. On arrival at Karachi one of the cases, containing indispensable parts of the machinery, is not to be found. A. knew that the cases contained machinery, but did not know the specific contents of each case. A. is liable to pay B. by way of compensation the value of the lost case, freight, and interest, but not the profits lost by the mill not having been set up at the time intended. (See British Columbia Sawmill Co. v. Nettleship (1868) L. R. 3 C. P. 499.) A., who makes a business of collecting and forwarding telegrams, contracts with B. to forward a ciphered cable message from Calcutta to X., who is B.'s correspondent in London. The message conveys no meaning on the face of it. A. negligently fails to forward the message in due time, and B. loses the profits which he would have made if X. had duly received and acted upon it. A. is not liable to B. for these profits, as he had no means of knowing what would be the consequences of a breach of his contract : founders v. Stuart (1876) 1 C. P. D. 326.] (j) A., having contracted with. B. to supply B. with. 1,000 tons of iron at 100 rupees a ton, to be delivered at a stated time, contracts with C. for the purchase of 1,000 tons of iron at 80 rupees a ton, telling 0. that he does so for the purpose of performing his contract with B. 0. fails to perform his contract with A., who cannot procure other iron, and B., in consequence, rescinds the contract. 0. must pay to A. 20,000 rupees, being the profit which A. would have made by the performance of his contract with B. [Note. If C. only knew generally that A. wanted the iron for resale he would not be entitled to damages beyond the difference between the contract price and the market price at the date of the breach : Thol v, Henderson (1881) 8 Q. B. D. 457. B., having contracted with a shipowner, X., to supply coal to his 202 308 THE INDIAN CONTRACT ACT. S. 73. steamers, enters into a contract with A., a colliery owner, for coal. The coal is expressly stated to be for shipment in X.'s steamers. A. fails to deliver coal to B. in time, and a ship of X.'s is delayed in consequence. X. sues B. and claims large damages ; B. defends the action and reduces the damages to a much smaller amount. A. is liable to B. for the costs reasonably incurred by B. in defending this action, as well as for the damages and taxed costs therein : Agiusv. 0. W. Colliery Co. [1899] 1 Q. B. 413, C. A. ; Hammond & Co. v. Bussey (1887) 20 Q. B. Div. 79 (/).] (k) A. contracts with B. to make and deliver to B., by a fixed day, for a specified price, a certain piece of machinery. A. does not deliver the piece of machinery at the time specified, and, in consequence of this, B. is obliged to procure another at a higher price than that which he was to have paid to A., and is prevented from performing a contract which B. had made with a third person at the time of his contract with A. (but which had not been then communicated to A.), and is compelled to make compensation for breach of that contract. A. must pay to B., by way of compensation, the difference between the contract price of the piece of machinery and the sum paid by B. for another, but not the sum paid by B. to the third person by way of compensation. (1) A., a builder, contracts to erect and finish a house by the first of January in order that B. may give possession of it at that time to C., to whom B. has contracted to let it. A. is informed of the contract between B. and C. A. builds the house so badly that, before the first of January, it falls down, and has to be rebuilt by B., who, in conse- quence, loses the rent which he was to have received from C., and is obliged to make compensation to 0. for the breach of his contract. A. must make compensation to B. for the cost of rebuilding the house, for the rent lost, and for the compensation made to C. [Note. In Jaques v. Millar (1877) 6 Ch. D. 153, it was held that where an intending lessor knew that the lessee wanted the premises for a certain trade, and refused to deliver possession for several weeks after the lessee was entitled to it, the lessee could recover for the estimated value to him of the possession during that time. There was anotherpoint on the question whether, under the Statute of Frauds, there was any enforceable agreement at all ; on that point the case is overruled : Marshall v. Berridge(l&81) 19 Ch. Div. 233.] (m) A. sells certain merchandise to B., warranting it to be of a particular quality, and B., in reliance upon this warranty, sells it to C. with a similar warranty. The goods prove to be not according to the warranty, and B. becomes liable to pay C. a sum of money by way of compensation. B. is entitled to be reimbursed this sum by A. [Note. A., a stevedore, agrees with B., a shipowner, to discharge the cargo of his ship, and B. agrees to supply all necessary and proper chains (/) The judgments in these cases overrule or supersede some earlier decisions. BREACH OF WARRANTY. 309 (among other gearing) reasonably fit for that purpose. A chain supplied by S. 73. B. is defective and breaks in use, and Z., a workman of A.'s, is thereby hurt. Z. sues A. under the English Employers' Liability Act, and A. settles the action by paying Z. a compensation which is admitted to be reasonable. B. is liable to make good to A. the compensation which A. has paid to Z. as damages naturally resulting from B.'s breach of his warranty. A. was entitled, as between himself and B., to rely on B.'s warranty, though such reliance was no excuse for A. as against Z. : Mow~bray v. Merry weather [1895] 1 Q. B. 640, C. A. A. sells a cow to B., whom he knows to be a farmer, and likely to put the cow in a herd, with a warranty that she is free from foot and mouth disease. The cow in fact has the disease, and communicates it to other cows with which she is placed, and several of them die. B. can recover from A. the whole loss, and not only the value of the cow sold, and it is immaterial whether A. gave the warranty in good faith or not : Smith v. Green (1875) 1 C. P. D. 92. A. agrees to recommend a broker to Z. and recommends Q., who is an undischarged bankrupt. A. does not know this, but could have ascertained it by reasonable inquiry. Z. on the strength of A.'s recommendation entrusts money for investment to Q., who misappropriates it. If A.'s agree- ment amounted to a contract, he has warranted the use of reasonable diligence in recommending a broker, and the measure of damages in an action by Z. against A. is the sum entrusted by Z. to Q. and misappropriated : De la Bere v. Pearson, Ltd. [1908] 1 K. B. 280, C. A. (0).] (n) A. contracts to pay a sum of money to B. on a day specified. A. does not pay the money on that day. B., in consequence of not receiving the money on that day, is unable to pay his debts, and is totally ruined. A. is not liable to make good to B. anything except the principal sum he contracted to pay, together with interest up to the day of payment. [Note. Settled law, but treated as anomalous. "The law does not regard collateral or consequential damages arising from delay in the receipt of money" : Per Cur., Graham v. CampMl (IW$) 7 Ch. Div. at p. 494. As to the liability to pay interest see p. 318, below. A. gives an ijara patta of certain property to B. It is a condition of thQ palta that B. should pay to the superior landlord the rent which A. was bound to pay to him. B. fails to pay the rent. The superior landlord thereupon sues A. for the rent, aii-l in execution of the decree obtained by him in the suit, the tenure is sold. B. is not liable to A. for the loss of the property, for A. could have paid the rent on default by B., and saved the property from sale : Girish Chandra v. Kunja Behari (1908) 35 Cal. 683.] (17) The doubt of one member of the Court was due to a minor complication in the facts which it is not thought useful to reproduce here. 310 THE INDIAN CONTRACT ACT. S. 73. (o) A. contracts to deliver 50 maunds of saltpetre to B. on the first of January at a certain price. B. afterwards, before the first of January, contracts to sell the saltpetre to 0. at a price higher than the market price of the first of January. A. breaks his promise. In estimating the compensation payable by A. to B., the market price of the first of January, and not the profit which would have arisen to B. from the sale to C., is to be taken into account. [Note. But a contract to resell at an advanced price is evidence, if not contradicted, of advance of market value : Engellv. Filch (1869) Ex. Ch. L. R. 4 Q. B. 659. The sale was of real estate, and the vendors had failed, not to show title, but to obtain possession, which they might have done.] (p) A. contracts to sell and deliver 500 bales of cotton to B. on a fixed day. A. knows nothing of B.'s mode of conducting his business. A. breaks his promise, and B., having no cotton, is obliged to close his mill. A. is not responsible to B. for the loss caused to B. by the closing of the mill. (q) A. contracts to sell and deliver to B., on the first of January, certain cloth which B. intends to manufacture into caps of a particular kind, for which there is no demand, except at that season. The cloth is not delivered till after the appointed time, and too late to be used that year in making caps. B. is entitled to receive from A., by way of compensation, the difference between the contract price of the clo^th and its market price at the time of delivery, but not the profits which he expected to obtain by making caps, nor the expenses which he has been put to in making preparation for the manufacture. [Note. Wilson v. Lane. & Yorks. R. Co., 9 C. B. N. S. 632, followed by the Court of Appeal, Schutze v. G. E. R. Co. (1887) 19 Q. B. Div. 30. The market price means here the price as diminished by the want of demand consequent on the season being past. A tailor, expecting to make large profits on the occasion of a festival that is to be held at a certain place, delivers a sewing machine and a cloth bundle to a railway company to be conveyed to that place, and through the fault of the company's servants they are not delivered until after the conclusion of the festival. The company had not notice of the special purpose for which the goods were required. The tailor is not entitled to damages for the loss of profits nor for his expenses incidental to the journey to that place and back, as such damages could not have been in the contemplation of the parties when they made the contract, nor can they be said to have naturally arisen in the usual course of things from the breach : Madras Railway Co. v. Govinda Rau (1898) 21 Mad. 172. If the company had known that the tailor wanted to use his goods for profit at the festival, it would be liable to him for the estimated loss of profit, and it would not be necessary for him to prove in detail what profit he expected to make : Simpson v. L. & N.- W. R. Co. (1876) 1 Q. B. D. 274.] HADLEY V. BAXENDALE. 311 (r) A., a shipowner, contracts with B. to convey him from Calcutta S. 73. to Sydney in A.'s ship sailing on the first of January, and B. pays to A., by way of deposit, one-half of his passage money. The ship does not sail on the first of January, and B., after being, in consequence, detained in Calcutta for some time, and thereby put to some expense, proceeds to Sydney in another vessel, and in consequence, arriving too late in Sydney, loses a sum of money. A. is liable to repay to B. his deposit with interest, and the expense to which he is put by his deten- tion in Calcutta, and the excess, if any, of the passage-money paid for the second ship over that agreed upon for the first, but not the sum of money which B. lost by arriving in Sydney too late. [Note. Here, and in several of the foregoing illustrations, it is assumed that A. has no defence to B.'s action on the contract ; and in this illustra- tion it seems to be assumed that A. does not know B.'s particular reason for wanting to be at Sydney by a certain date. A. contracts to sell by description to B. sulphuric acid commercially free from arsenic. A. does not know what B. wants the acid for. B. receives sulphuric acid from A. under the contract, and uses it in producing a kind of sugar used by brewers. The acid is in fact not free from arsenic, the sugar manufactured with ib is deleterious and useless, and B. incurs liability to his customers, and the. goodwill of his business is diminished in value, and other goods of B.'s are spoilt by being mixed with this acid. B. is entitled to recover from A. 'only the price of the acid and the value of the goods spoilt : Bostock & Co. v. Nicholson & Sons [1904] 1 K. B. 725.] Suit for price of goods. It has been recently held by the High Court of Bombay that it is not permissible under the Contract Act for a seller of goods to maintain a suit for the price thereof against the buyer who has failed to take delivery thereof, and that the only remedy open to the seller is to have the goods sold in the first instance and then seek to recover the loss, if any, accruing on such sale : P. R. & Go. v. Bhagtvandas Chaturbhuj (1908) 10 Bom. L. E. 1113. Rule in Hadley v. Baxendale. The illustrations to this section were obviously considered of special importance. We have thought that several of the English and recent Indian decisions would be most usefully dealt with by stating them in the form of additional illustrations and inserting them, distinguished by inclusion within square brackets and by the reference to the report of each case, in the places which seemed most appropriate. The text of the section is in substance identical with the draft of the Law Commissioners, and so are the illustrations as far as they go, though the number originally proposed was greater. The intention was plainly to affirm the rule of the Common Law as laid down by the Court of Exchequer 312 THE INDIAN CONTRACT ACT. S. 73. in the leading case of Hartley v. Baxendale, now more than half a century ago. That rule, expressly and carefully framed to be a guide to Judges in directing juries, was as follows : " Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be either such as may fairly and reasonably be considered arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it. Now, if the special cir- cumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordin- arily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circum- stances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case ; and of this advantage it would be very unjust to deprive them " (ti) The Court which gave judgment in Hadley v. Baxendale was a very strong Court ; and the rule laid down by it is in harmony with many other rules in our law which fix the measure of liability by the standard of what was known to the defendant, or ought to have been then and there known to a reasonable man in his circumstances. As formulated, the rule has two branches. First, the party breaking a contract is liable for damages arising "according to the usual course of things" ; secondly, he is liable, or also liable, for " such as may reasonably be supposed to have been in the contemplation of both parlies at the time they made the contract as the probable result of the breach of it." But, as a recent writer has correctly pointed out, the first branch is in truth only a specification of the simpler cases under the second ; for the natural and ordinary consequences of an event namely, such as can be foreseen without any special information are always assumed to be in the contemplation of reasonable men, and it is no excuse for a man to say that he failed to think reasonably or did not think at all (). This view seems to be borne out by a remark of the late Lord (A) Hadley \. Baxendale (1854) 9 Ex. 341, 354, 96 K. R. 742, 753 (where one passage is amended in accordance with the report in 23 L. J.), Finch. Sel. Ca. 755, 762. (i) See Mr. F. E. Smith in L. Q. K. xvi. 275, 399. HADLEY V. BAXENDALE. 313 Bowen when a member of the Court of Appeal : " A person can only be held S. 73. to be responsible for such consequences as may be reasonably supposed to be in the contemplation of the parties at the time of making the contract. That is the principle really at the bottom of Hadley v. Baxendale " (k). Another late eminent Judge proposed a still further simplification. Why need we bring in the consideration of what the parties contemplate ? " In my opinion," he said, " the parties never contemplate a breach, and the rule should rather be that the damage recoverable is such as is the natural and probable result of the breach of contract" (/). But, with great respect, this would not really simplify the matter. For there is no universal definition of what is meant by "natural and probable" ; and when we ask what is to be deemed natural and probable in a given case there seems to be no better way of fixing it than by reference to the judg- ment of a reasonable man having the means of information then and there available. In other words, those consequences are natural and probable in a legal sense which the parties in fact contemplate, or would as reasonable men contemplate. There was at one time considerable authority for saying that, as to damages which could not be foreseen without information of special cir- cumstances, notice of any such circumstances at the time of entering into the contract would not suffice to make the defendant liable, but there must be in effect, if not in terms, an undertaking to answer for resulting special damage (m). But this view was afterwards distinctly rejected by the Court of Appeal in England. "It cannot be said that damages are granted because it is part of the contract that they shall be paid ; it is the law which imposes or implies the term that upon breach of a contract damages must be paid" (ri). Even without this authority the opinion in question (&) Grebert-Borgnls v. Nugent (1885) p. 676. This is confirmed by Hammond 15 Q. B. Div. 85, 92. 4- Co. v. Bussey (1887) 20 Q. B. Div. 79 : (I) Cotton, L.J., in McMahon \. Field see especially per Bowen, L.J., at p. 97 ; (1881) 7 Q. B. Div. at p. 597. and the later case of Aglus v. Great (/.) Home v. Midland It. Co. (1873) Western Colliery Co. [1899] 1 Q. B. 413, L. R. 8 C. P. 131, Ex. Ch. ; see especially assumes the opposite opinion to be the judgment of Blackburn, J. Willes, J., untenable. The learned editor of Mayne had more than once intimated a like on Damages, in which book the theory of opinion. an auxiliary contract to pay special (II) Hydraulic Engineering Co. v. damages appears to have been first pro- McHaffie (1878) 4 Q. B. Div. 670, 677, per pounded, does not seem to us to have Cotton, L.J. The party " does not enter given adequate weight to these decided into a kind of second contract to pay and unanimous utterances ; neither do the damages " : Bramwell, L.J., at p. 674. learned editors of Smith's Leading Cases " An agreement to pay damages does not (notes to Vicars v. WilcocTts in vol. ii.). form part of the contract " : Brett, L.J., at .4 THE INDIAN CONTRACT ACT. S- 73. could not be entertained in British India, being inconsistent with the plain terms of the section. Further discussion of it would therefore be useless here. So far as practicable, " a person with whom a contract has been broken has a right to fulfil that contract for himself as nearly as may be, but he must not do this unreasonably or oppressively as regards the other party, or extravagantly." " The question must always be whether what was done was a reasonable thing to do, having regard to all the circumstances," and one test is "what a prudent person uninsured," i.e., not having a claim for compensation or indemnity on any one, " would do under the same circumstances " (0). It is not a reasonable thing, for example, to hire a special train to save an hour or so of time when there is no particular reason for being at one's destination at a certain hour ; and expense so incurred cannot be recovered as damages (0). Sometimes it has been said that liability for consequences does not extend so far in contract as in tort ; but there is no real authority for any such rule (p). In England the Sale of Goods Act, 1893, s. 51, provides as follows : " (1) "Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery. " (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract. " (3) Where there is an available market for the goods in question, the measure of damages is primd facie to be ascertained by the difference between the contract price and the market or current price of goods at the time or times when they ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver." This section, though not of positive authority in British India, may be useful as a compendious and well-considered statement of the existing rule. As to the difference between contract and market price, it may be regarded as an application of the principle last stated as to the disappointed party's right to fulfil the contract himself at the defaulting party's cost, so fsir as it can reasonably be done. In the absence of any more specific rule applicable to the case, damages for the breach of a contract to perform any specified work are to be " assessed at the pecuniary amount of the difference between the state of the plaintiff upon the breach of the contract and what it would have been if the contract had been performed," not the sum which it would cost to O) Le Blamlie v. L. $ N.-W. R. Co. Q>) The "Netting Hill" (1884) 9 P. (1876) 1 C. P. Div. 286, per James, L.J., Div. 105. 113. at p. 309, and Mellish, L.J., at p. 313. CONSEQUENTIAL DAMAGES. 315 perform the contract, though in particular cases the result of either mode S. 73. of calculation may be the same (q). Matters of external and collateral compensation, as by insurance (r), or by an access of profit to some only of plaintiffs suing jointly in another transaction which but for the breach of contract would not have taken place (s), or through a new contract with a third person (/), are not taken into account for the purpose of reducing damages. The explanation to the present section does not appear to contradict this rule. The article on Damages by Mr. Blake Odgers, K.C.. in the Encyclopeedia of the Laws of England, may be referred to as giving a learned and careful summary of the 'whole subject down to its date, 1907, 2d ed. Explanation to s. 73 : " means which, existed," etc. This explanation has caused considerable difficulty in practice; the words "means which existed of remedying the inconvenience" have seemed obscure. No similar words are known to occur in English authorities, but the framers of the Act appear to have had in view the class of cases where, as we have just seen (u}, the damages recoverable for consequential expenses are limited by the test of what a prudent man might have reasonably done if the whole expense was to fall on himself. The words are also sufficient to cover the case of a party who omits to take natural aud obvious means of diminishing the loss incurred by the other party's failure to perform his contract. It seems on principle that in such a case consequential damage which might have been avoided by the exercise of common intelligence and prudence is not recoverable : thus, if one has to replace goods that have not been delivered in time, and has recklessly or stupidly bought them at an excessive price, the seller in default remains chargeable only with the difference between the contract and the normal market price. The rule must, of course, be applied with discretion ; a man who has already put himself in the wrong by breaking his contract has no right to impose new and extraordinary duties on the aggrieved party. That party can be expected only to use ordinary and reasonable diligence, much less can he be expected to warrant success where the result of diligent endeavour is in its nature doubtful. A. agrees to let his house to B. at a certain rent. B. refuses to take the house, and A. sues B. for damages. The Chief Court of the Punjab is reported to have held that the measure of damages is the loss of rent suffered (17) Wigsell v. School for Indigent (r) Bradburn v. G. W. R. Co. (1874) Blind (1882) 8 Q. B. D. 357, 364, follow- L. R. 10 Ex. 1. ing Ilubinxon v. liar man (1848) 1 Ex. (.>) Jebsen v. E. $ W. India Dock Co. 855, Finch, Sel. Ca. 753, and Lock v. Furze (1875) L. R. 10 C. P. 300. (186G) L. R. 1 C. P. 441. But there is a (0 Joytier v. Weeks [1891] 2 Q. B. 31, special rule as to covenants to repair. C. A. See p. 318, below. (u) Pp. 312, 313, above. 316 THE INDIAN CONTRACT ACT. S. 73. by A. after deducting such sura as A. could recover from another person by way of rent by making reasonable efforts to secure another tenant (./). We much doubt whether the Court can have intended to lay down this or any like general proposition ; and in the particular case, unless eligible tenants requiring immediate possession are much more common in the place in question than in most parts of the world, or unless it was proved that another tenant was actually ready and willing to enter and pay rent, the deduction approved by the Court would seem rather speculative. Reason- able efforts to secure a tenant do not produce any rent until an actual tenant is found, and the interval may be considerable. The probability of such effort succeeding within a reasonable time must obviously depend on local and often on temporary circumstances. Contracts relating to immoveable property. It is commonly said that where a person sustains loss by reason of a breach of contract he is prima facie entitled, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been per- formed (y), though, as we have seen, this form of statement is open to some misunderstanding (z). Now this rule does not apply in English law to contracts for the purchase of immoveable property. It was finally settled by the decision of the House of Lords in Bain v. Fothergill (a) that a purchaser of real estate cannot recover damages for the loss of his bargain, but only his deposit and expenses ; and that even if the vendor knew that he had no title, nor any means of acquiring it, the purchaser may have a further remedy by an action for deceit, but not on the contract. The reason for this exceptional rule is that the purchaser of real estate in England must expect some degree of uncertainty as to whether a good title can be effectively made by the vendor, whereas the vendor of a chattel must know, or at all events is taken to know, what his right to the chattel is (b). The special rule does not, however, apply to the case of wilful default in giving possession (e), nor to an express covenant for quiet enjoyment (or) LacJimi Narain v. Vernon (1906) (V) In the United States, where registry Pnnj. Rec. no. 137. In England such a of title or of assurances, in some form, decision, as proceeding wholly on the , is universal, the reason is generally held special facts, would hardly be reported. not to exist, and the rule therefore But the ambition of turning inferences of not accepted : Sedgwick, Elements of fact into rules of law is one of the besetting Damages, ad fin. temptations of a system founded on (<<) Engell v. Fitch, Ex. Ch. (1869) judicial precedents. L. R. 4 Q. B. 659 (a^ to the authority of (y) Itobinson v. Harman (1848) 1 Ex. this case see per Byrne, J. [1902] 1 Ch. 855. at p. 195) ; Jaques v. Millar (1877) 6 Ch. (2) P. 314, above. D. 153 ; Royal Bristol Permanent Build- () (1874) L. R. 7 H. L. 158. ing Society v. Bomash (1887) 35 Ch. D. 390. DAMAGES: SALE OP IMMOVABLE PROPERTY. 317 m an executed conveyance (d), nor to an executory agreement to make a S. 73. title by a party who appears on the face of the agreement not to have any title at its date (e), nor, it seems, to unreasonable omission to complete the title by taking some definite step in the vendor's power, such as applying for the lessor's consent to an assignment (/), nor to damages caused not by defect of title or any real difficulty of conveyancing, but by the vendor's want of reasonable diligence in completing (g}. The rule in Bain v. Fothergill has been assumed in the High Court of Bombay to be the law of British India. A purchaser claimed to recover damages for the loss of his bargain, and the Court disallowed his claim on the ground that the vendor had offered to do all that lay in her power to carry out her contract (h). No reference was made to the Contract Act, but the argument turned on the question whether the case came under the rule in Bain v. Fothergill or the exception in Engell v. Fitch (). The assumption so made by counsel and the Court was, it is submitted, erroneous. S. 73 is general in its terms, and does not exclude the case of damages for breach of contract of immoveable property (&), and in fact the rule was not settled beyond question in England when the Act was passed. " The Legislature has not prescribed a different measure of damages in the case of contracts dealing with land from that laid down in the case of contracts relating to commodities " (I). Where, therefore, a purchaser of land claims damages for the loss of his bargain, the question to be decided is whether the damage alleged to have been caused to him " naturally arose in the usual course of things from such breach " ; and in an ordinary case it would be difficult to hold otherwise. Even apart from the Act, the English rule is treated in its own jurisdiction as anomalous, and justified only by the peculiar conditions of English titles and conveyancing. It would therefore seem very doubtful wjiether, on the general principles of " justice, equity, and good conscience," (d) Lock v. Furze, Ex. Ch. (1866) (ft) Pitamberv. Cansibal (1886) 11 Bom. L. R. 1 C. P. 441. 272. It is by no means clear that, on its (e) Wall v. City of London R. P. Co. own ground, the decision was correct. In (1874) L. R. 9 Q. B. 249. The Court England we should not ascribe much thought the case so clear that they did not diligence, not to say good faith, to a vendor delay judgment to see the result of Bainv. of a mortgaged house who professed Fothergill (above), then pending in the not to know where the title-deeds were House of Lords ; see L. R. 9 Q. B. at and made no inquiry of the mortgagee. p. 252. (0 P. 316, above. (/) Day v. Singleton [1899] 2 Ch. 320, (/O It is remarkable that none of the C. A., where, however, on the view taken illustrations to the section relate to by the Court of the facts, the default was contracts of land, wilful. (I) Per Farran, C.J., in Nagardas v. O/) Jones v. Gardiner [1902] 1 Ch. 191 AhmedTthan (1895) 21 Bom. 175, 185. 318 THE INDIAN CONTRACT ACT. S. 73. it was ever applicable in British India. The view propounded above was recently approved by the High Court of Bombay in Ranchhotl v. Manmohandas (ni). The case was, however, one of wilful default on the part of the vendor in completing the title, and it was held, following Dm/ \. Singleton (n), that the purchaser was entitled to recover not only the deposit with interest and expenses, but the loss of his bargain. At the same time the Court expressed the opinion that the rule in Sain v. Fothergill (o) was not law in this country. u As section 73 imposes no exception on the ordinary law as to damages, whatever the subject-matter of the contract, it seems to me that in cases of breach of contract for sale of an immoveable property through inability on the vendor's part to make a good title the damages must be assessed in the usual way, unless it can be shown that the parties to the contract expressly or irapliedly contracted that this should not render the vendor liable to damages " (p). At all events, where a vendor of land guarantees his title to the purchaser, and the latter is evicted from his holding, he is entitled to recover the value of the land at the date of eviction, and not merely the purchase-money paid for it (q). Where a lessee's covenant to deliver up the premises in good repair is broken at the end of the term, the measure of damages would on strict principle be the amount by which the value of the reversion is diminished ; but the difficulty and inconvenience of this calculation have led to the adoption, as the practical measure in such cases, of the reasonable cost of putting the premises into the state of repair in which they ought to have been left (r). In the case of a breach during the term the measure is, according to the more general standard, the diminution in the value of the reversion ; and where the covenant is in a sub-lease expressed to be such, the intermediate lessor's liability to the superior lessor on the covenants in the original lease will be taken into account for this purpose (s). As to liability for loss of, or damage to, property delivered to common carriers, see Act III of 1865 ; and as to the liability of a railway company, see Act IX of 1890. Interest by way of damages. Act XXXII of 1839 provides for the payment of interest by way of damages in certain cases (t). Under (<) (1907) 9 Bom. L. R. 1087. (r) Joyner v. Week* [1891] 2 Q. B. 31, (n) [1899] 2 Ch. 320, C. A. See note C. A. (/), p. 317, above. (*) Conquest v. Ebletts [1896] A. C. 490. O) (1874) L. R. 7 H. L. 158. (0 The Act consists of a single section, (p) Per Macleod, J., 9 Bom. L. R. 1087, which runs as follows : at p. 1091. " Whereas it is expedient to extend to (q) Nagardas v. AhmedTtlutn (1895) 21 the territories under the government of Bom. 175. the East India Company, as wel within INTEREST BY WAY OF DAMAGES. 319 that Act the Court may allow interest on debts or sums certain which are S. 73. payable by an instrument in writing from the time when the amount becomes payable where a time is fixed for payment, or, where no time is fixed, from the date on which demand of payment is made in writing giving notice to the debtor that interest will be claimed. The question arose in a Madras case (u) whether interest could be recovered by way of damages under the present section (illustration (n) ) where it was not recoverable under the Interest Act, and it was held that it could not be so recovered. The effect of the judgment in that case is that wherever interest could be claimed by way of damages and illustration (n) is an instance of such a case it should not be awarded unless either the require- ments of the Interest Act are complied with, or interest is recoverable at common law. In an Allahabad case (x) decided a year earlier the plaintiff sued the defendant as lessee (thekadar) of a village for arrears of rent together with interest, and it was held that, though under the N.-W. P. Rent Act (y) the defendant was not liable to pay interest on the arrears, he was chargeable with interest under s. 73 of the Contract Act. In the course of a very brief judgment the Court (2) said : " Illustration (n) of s. 73 shows that where a person breaks his contract to pay another a sum of money on a day certain or specified he is liable for the principal sum due, together with interest up to the day of payment." As to this decision it may be observed that no interest ought to have been allowed up to the date of the suit (a), as the provisions of the Rent Act the jurisdiction of Her Majesty's Courts claimed from the date of such demand as elsewhere, the provisions of the statute until the term of payment, provided that 3rd and 4th William IV., chapter 42, interest shall be payable in all cases in section 28, and concerning the allowance which it is now payable by law. ' ' of interest in certain cases : It follows Lord Tenterden's Act, passed " It is therefore hereby enacted that upon in England a few years earlier (3 & 4 all debts or sums certain, payable at a Will. IV., c. 42, s. 28), as to which see certain time or otherwise, the Court L. C. $ D. R. Co. v. S. E. R. Co. [1893] before which such debts or sums may be A. C. 429. recovered may, if it shall think fit, allow (u) Kamalammal v. Peeru Meera interest to the creditor at a rate not Levvai Eowthen (1897) 20 Mad. 481. exceeding the current rale of interest (y) Ghanshiam Singh v. Daulat Singh from the time when such debts or sums (1896) 18 All. 240. See also Ghanshiam certain were payable, if such debts or Singh v. Daulat Singh (1896) All. W. N. sums be payable by virtue of some written 55. instrument at a certain time, or if payable (y) Act XII of 1881, s. 34, Explanation, otherwise, then from the time when (z) Consisting of Edge, C.J., and Aik- demand of payment shall have been made man, J. in writing, so as such demand shall give (a) As to interest after suit, see s. 34 notice to the debtor that interest will be of tlie Code of Civil Procedure, 1908. 320 THE INDIAN CONTRACT ACT. Ss. 73, 74. which applied to the parties expressly exempted thekadars from liability for such interest. On the point now before us the decision is directly opposed to that of the Madras Court. No reference was made to the Interest Act, and it does not appear from the report that the case came within that Act. The Madras decision has been followed by the Chief Court of the Punjab (b). The rule of English Common Law, and therefore presumably of British India apart from the Interest Act, is " that interest is not due on money secured " even "by a written instrument, unless it appears on the face of the instrument that interest was intended to be paid, or unless it be implied from the usage of trade, as in the case of mercantile instruments " (c). " At common law interest was not payable on ordinary debts, unless by agreement or by mercantile usage ; nor could damages be given for non- payment of such debts " (d). There does not seem to be any sufficient ground for reading into illustration (n) to the present section an intention to abolish this rule and supersede the Act of 1839. Indeed, the illustration does not say that the defendant is necessarily liable to pay interest, but only assumes that he may be so under the Act of 1839 or otherwise, and says that he is not in any event liable for more. The section applies only where a contract has been broken. This would seem to need no proof or even statement, yet judicial affirmation of it has been necessary. A toll contractor who suffers loss in his income by reason of the discontinuance of the traffic, owing to plague regulations made by Government consequent upon the outbreak of plague in the locality, has no cause of action against the Government to recover damages as on a breach of contract (e). There is no breach of contract involved in making the regulations ; and one may add that such an action would not have been possible in any Western country. We fail to see how the pleader can have seriously thought he could make out a contract either actual or constructive between the plaintiff and the Government (/). 74. (/) When a contract has been broken, if a sum is compensation named in the contract as the amount to be tractThe^penai'ty P aid in case of sucl1 breach, or if the contracL stipulated for. contains any other stipulation by way of penalty, the party complaining of the breach is entitled, (b} Bura v. Mailia S/ta/t, (1901) Punj. (d) Lindley, L.J., S. C. in C. A. [1892] Rec. no. 104. 1 Ch. at p. 140. (c) Page v. Xewman (1829) 9 B. & C. (e) Secretary of State for India v. 378, 381, 33 R. R. 204, 206 ; and see the Abdul Rahim (1902) 4 Bom. L. R. 874. English authorities reviewed by Lord (/) As to the amendments in this section Herschell, L. C. $ D. R. Co. v. S. E. R. see pp. 323325, below. Co. [1893] A. C. 429, 437 sqq. STIPULATIONS BY WAY OF PENALTY. 321 whether or not actual damage or loss is proved to have been S. 74. caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Explanation. A stipulation for increased interest from the date of default may be a stipulation by ivay of penalty. Exception. When any person enters into any bail-bond, recognisance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Government of India or of any local Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. Explanation. A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested. Illustrations. (a) A. contracts with B. to pay B. Es. 1,000 if he fails to pay B. Es. 500 on a given day. A. fails to pay B. Es. 500 on that day. B. is entitled to recover from A. such compensation, not exceeding Es. 1,000, as the Court considers reasonable. (b) A. contracts with B. that, if A. practises as a surgeon within Calcutta, he will pay B. Es. 5,000. A. practises as a surgeon in Calcutta. B. is entitled to such compensation, not exceeding Es. 5,000, as the Court considers reasonable. (c) A. gives a recognisance binding him in a penalty of Es. 500 to appear in Court on a certain day. He forfeits his recognisance. He is liable to pay the whole penalty. (d) A. gives B. a bond for the repayment of Es. 1,000 with interest at 12 per cent, at the end of six months, with a stipulation that, in case of default, interest shall be payable at the rate of 75 per cent, from the date of default. This is a stipulation by way of penalty, and B. is only entitled to recover from A. such compensation as the Court considers reasonable. (e) A., who owes money to B., a money-lender, undertakes to repay him by delivering to him 10 maunds of grain on a certain date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 20 maunds. i.e. 21 322 THE INDIAN CONTRACT ACT. S. 74. This is a stipulation by way of penalty, and B. is only entitled to reasonable compensation in case of breach. (f) A. undertakes to repay B. a loan of Es. 1,000 by five equal monthly instalments, with a stipulation that, in default of payment of any instalment, the whole shall become due. This stipulation is not by way of penalty, and the contract may be enforced according to its terms. (g) A. borrows Us. 100 from B., and gives him a bond for Es. 200, payable by five yearly instalments of Es. 40, with a stipulation that, in default of payment of any instalment, the whole shall become due. This is a stipulation by way of penalty. Penalty and liquidated damages. This section boldly cuts the most troublesome knot in the Common Law doctrine of damages. By the Common Law parties may name a penal sum as due and payable on a breach of contract, that sum being, according to the true intention of the parties, only a maximum of damages. In that case the real damages, and no more, are recoverable. On the other hand, they may by consent assess a fixed measure of damages, liquidated damages as they are called, to avoid the difficulty that must often be found in setting a pecuniary value on obligations not referable, on the face of them, to any commercial standard. So far this looks very well. The trouble is that even now the Courts have not arrived at clear or certain rules for deciding to which of these two classes a given stipulation for a penal or seemingly penal sum belongs. The only thing that is quite certain is that the use of the words " penalty " or " liquidated damages " is not decisive ; and that even the addition of negative words purporting to exclude the other alternative, for example " as liquidated damages and not as a penalty " (g}, will not make it so. Two causes appear to have conspired to produce this anomalous result : a well-meant but perhaps not wholly well-informed endeavour to imitate the equitable doctrine of giving relief against forfeiture (h) and, reinforcing this, a logical or arith- metical repugnance of the Common Law (perhaps connected with the canonical prohibition of usury) (') to admit that a greater sum of money can ever be due for the breach of an obligation to pay a smaller one. ' " That a very large sum should become immediately payable in consequence of the non-payment of a very small sum, and that the former should not be con- (g) In KemUe v. Farren (1829) 6 Bing. (K) See per Jessel, M.E., Wallit v. 141, 31 E. R. 366, a sum expressly declared Smith (1882) 21 Ch. Div. 243, 256. by the parties to be " liquidated and (/') It must be remembered that in the ascertained damages, and not a penalty or Middle Ages, and even later, usury meant penal snm, or in the nature thereof " was not taking exorbitant interest, but taking held to be a penalty. interest at all. PENALTY AND LIQUIDATED DAMAGES. 323 sidered as a penalty, appears to be a contradiction in terras " (&). Accordingly S. 74. a conventional larger sum agreed upon as payable in the event of failure to pay a smaller sum, or in such an event among others, is treated as penal only. Further, it is understood that " where a sum is made payable by a contract to secure performance of several stipulations the damages for the breach of which respectively must be substantially different . . . that sum is primdfacM to be regarded as a penalty, and not as liquidated damages " (I). The truth is that here, as in some other branches of the law, what once was a rule of policy overriding the intention of the parties has been turned into an artificial and more or less arbitrary rule of construction. But it is quite needless to enter in this place upon the somewhat confusing application of the resulting distinctions, for the manifest purpose of the present section is to get rid of all these questions by carrying out the tendency of the English authorities to its full consequences. There may, again, be a conventional sum which is neither damages nor penalty, but, as it has been called, a "liquidated satisfaction" (m), the agreed price of liberty to do or omit something. In such a case there is merely a conditional or alternative promise which, if not open to any other objection, will take effect according to its terms. Amendment. There is no doubt that, as the section originally stood, it was intended to do away with the distinction between a penalty and liquidated damages (ri). u The sole object of the section appears to have been to provide for the class of cases to which KemUe v. Farren (o) belongs, and in which the distinction between ' liquidated damages ' and ' penalty ' has given rise to so much difference of opinion in the English Courts " (p). The first paragraph and the explanation following it were substituted for the paragraph as originally enacted by the Indian Contract Act Amend- ment Act VI of 1899, s. 4. The italicised words indicate the portion newly added in the section. Illustrations (d), (e), (f), and (g) were also inserted by the same Act. The marginal note to the section has also been altered ; it originally stood thus : " Title to compensation for breach of contract in which a sum is named as payable in case of breach." The first section of the Amendment Act provides that it shall come (ft) KemUe v. Farren, 6 Bing. at p. 148. 228 ; The Brahmaputra Tea Co., Ltd. v. (Z) A. L. Smith, L.J., Wllhon v. Love Scarth (1885) 11 Gal. 545, 550 ; Dem [1896] 1 Q. B. 626, 631. Natli v. Nlbaran Chandra (1899) 27 Gal. (/) See Lord Elphinstone v. MonUand 421, 423 ; Nait Ram v. Shib Dat (1882) Iron and Coal Co. (1S86) 11 App. Ca. at 5 All. 238, 241 ; Dllbar Sarkar v. Joysri p. 347. Kurmi (1898) 3 G. W. N. 43, 45. () Mackintosh v. Crow (1883) 9 Cal. () 6 Bing. 141. 689, 692, per Wilson, J. ; Venqideswara (p) Per Sargent, C.J., in Umarkhan v. Putter v. Chatw Achen (1881) 3 Mad. 224 Salekhan (1892) 17 Bom. 106, 111. 212 324 THE INDIAN CONTRACT ACT. S. 74. into force on the first day of May, 1899, and that it shall apply to " every contract in respect of which any suit is instituted or which is put in issue in any suit after the aforesaid date." These words have already given rise to conflicting opinions. The Madras High Court has expressed an opinion that the words " contract in respect of which any suit is instituted " apply to cases where a suit is brought to enforce a contract, or to have a contract set aside, and that the words " contract which is put in issue " apply to cases where it becomes necessary for the Court to adjudicate upon a contract, although the suit was not brought either to enforce it or to have it set aside. It is quite clear that where a suit is brought "in respect of" a contract the revised section will not apply to the contract unless the suit is " instituted " after the commencement of the Amendment Act. It is, however, not so clear whether the words " put in issue " in any suit mean put in issue in any suit instituted after the commencement of the Act. The Madras High Court would read the word " instituted " after the words " put in issue in any suit." The result, therefore, is that, according to that Court, the revised section would not apply to a contract " put in issue " in any suit unless the suit is instituted after the commencement of the Act (q). It was said by the Court that " to construe it otherwise would lead to serious inconveniences and anomalies, and that, having regard to the general scope of the amendments made by the Act and the canons of construction in cases where vested rights are affected or the legal character of past transactions is concerned, the Act should be construed as applying only to suits instituted after the commencement of the Act." On the other hand, it has been held by the High Court of Allahabad, without reference to the Madras case or to the possible difference of opinion on the point, that it is enough for the application of the revised section that the contract is " put in issue " after the commencement of the Act, though the suit in which it is put in issue may have been instituted before that date. Where a suit was, therefore, brought by a creditor before the com- mencement of the Act to recover the principal and interest due on a bond, and the defendants filed their written statement after the commencement of the Act, objecting inter alia to the enhanced rate of interest charged in the bond, it was held that the contract was, under the circumstances, " put in issue" after the commencement of the Act, and that the revised section, therefore, applied to the case (r). As to this decision, it may be remarked that it ignores the distinction between a suit " in respect of" a contract and a suit in which the contract is " put in issue." The suit was to (q) Sarikara v. Sankara (1901) 25 (f) Brij hukhan v. Saml-vd-din Mad. 343, 348 ; Chinna v. Pedda (1902) (1902) 25 All. 169. 26 Mad. 445. INTEREST BY WAY OF PENALTY. 3*25 recover the principal and interest due on the bond, and it was, therefore, S. 74. "in respect of" the bond. If the bond be said in such a case to be " put in issue," it is difficult to conceive cases in which there could be a suit " in respect of " it. We think that, on the whole, the distinction drawn by the Madras Court between the words " in respect of " and " put in issue " is sound, and that the revised section does not apply unless the suit is instituted after the commencement of the Act, whether it be one "in respect of" the contract, or one in which the contract is "put in issue." The first paragraph of the section stood as follows before the amendment : " When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named." Stipulations for interest. By far the largest number of cases decided under the original paragraph related to stipulations providing for interest. Those stipulations may be divided into the following three classes : I. Stipulations for payment of interest at a higher rate on default on the part of the debtor to pay the principal or part thereof or interest on the due date, and these may again be subdivided into (a) Stipulations for payment of enhanced interest from the date of the bond, and (b) Those for payment of such interest from the date of default ; II. Stipulations for payment on default of compound interest, which may be subdivided into (a) Stipulations for payment of compound interest at the same rate as simple interest, and (b) Those for payment of compound interest at a rate higher than simple interest, or for payment of an increased rate of interest and compound interest at that rate ; III. Stipulations for payment of interest at a specified rate if the principal or a part thereof is not paid on the due date. There has been considerable conflict in the decisions of the several High Courts on the section in its original form, especially as regards stipu- lations comprised in Class I. That section applied only to contracts in which a sum was named as the amount to be paid in case of the breach thereof, and the conflict arose owing to different interpretations pub upon the expression " named." The section has been amended to put an end to the divergent views taken by the Courts, and is now " amplified so as to 326 THE INDIAN CONTRACT ACT. S. 74. make it apply in terms to all stipulations by way of penalty, whether the penalty consists of a sum named or not " (s). The stipulations comprised in the above classes and the effect of the amendment are considered below : I. Stipulations for enhanced rate of interest. Such a stipulation occurring in a contract may be of a twofold character : (1) it may either provide for payment of interest at an increased rate from the dale of the contract on failure of the debtor to pay on the due date the interest or principal or an instalment of principal, or (2) it may provide for payment at a higher rate from the date of default only. Thus if A. borrows Rs. 1,000 from B. on 1st June, 1902, A. may give a bond to B. for the repayment of the loan on 1st June, 1903, with interest at 12 per cent, per annum, with a stipulation either that in case of default interest shall be payable at the rate of 25 per cent, from the date of the bond, namely, 1st June, 1902, or from the date of default, namely, 1st June, 1903. In the former case it has been held that the stipulation always (/) amounts to a penalty, and the provisions of s. 74 apply, so that the Court may relieve the debtor, and award only such compensation to the creditor as it considers reasonable (u). In the latter case, where the increased rate of interest is stipulated to have operation only from the date of default, the provision has not generally been regarded as a penalty (x). The section as it stood 0) See Bombay Government Gazette, deswara v. Chatu Ac/ten (1881) 3 Mad. 1898, Part VI. p. 36 (Statement of Objects 224 ; Vythilinga v. Sundarappa (1882) 6 and Reasons). Mad. 167 ; Nanjappa v. Nanjappa (1888) (#) The leading case on the subject is 12 Mad. 161; Gopalvduv. Verikataratnam Mackintosh v. Crow (1883) 9 Cal. 689. (1894) 18 Mad. 175 ; Khurram Singh v. The result of the cases will be found Bhawani Bakhsh (1881) 3 All. 440; summarised in Umarkhan v. Salehhan Kharag Singh v. Bhola Nath (1881) 4 (1892) 17 Bom. 106, 113, 114, and in All. 8 ; Narain Das v. Chait Ham (1884) Abdul Gani v. Nandlal (1902) 30 Cal. 6 All. 179. See also Rasajl v. Suyuna 15, 17. In the former case it is stated (1869) 6 B. H. C. A. C. 7 ; Bichook Nath that a stipulation for a higher rate of v. Ham, Lochun (1873) 11 B. L. R. 135 ; interest is "generally " a penalty, in the Sundar Koer v. Rai Sham Krishen (1907) latter that it has " always" been held as 34 Cal. 150, 157, L. R. 34 Ind. Ap. 9. a penalty. The current of decisions (x) Mackintosh v. Hunt (1877) 2 Cal. justifies the use of the latter expression. 202 ; Mackintosh v. Crow (1883) 9 Cal. (u) Mvthura Persad v. Lug gun Kooer 689 ; Dene Nath v. Nibaran Chandra 1883) 9 Cal. 615; SungutLalv.Baijnath (1899) 27 Cal. 421. 425; Abdul Gani Roy (1886) 13 Cal. 164 ; Kalachand Kyal T. Nandlal (1902) 30 Cal. 15 ; Dullabhdas v. SJtib Chunder (1892) 19 Cal. 392 ; v. Lalishmandas (1889) 14 Bom. 200 ; Rameshwar Prosad Singh v. Rai Sham I'marlihan v. Stdehhan (1892) 17 Bom. Kixhen (1901) 29 Cal. 43, 50; Siijtiji v. lOfi ; Jmjaniidhnm v. Rugunadha (1886) -V/m/(1889) 14 Bom. 274 ; Tnmbali v. 9 Mad. 276; Periasami Thalamr v. Bhagchand (1902) 27 Bom. 21 ; Vengi- Sulmtnmnian Axari (1904) 14 Mad. L. J. INTEREST BY WAY OF PENALTY. 327 before the amendment required as one essential condition that there should S. 74. be " a sum named in the contract as the amount to be paid in case of breach." Where the stipulation for the higher rate of interest is to operate from the date of the bond, there is invariably in such a case " a sum named in the contract as the amount to be paid in case of breach." Thus in the illustration given above A. would be liable on default to pay B. Rs. 1,250, though, if he repaid the loan on the due date, the principal with interest would have amounted to Rs. 1,120 only. But no such sum can be said to be named in the contract, where the increased rate is to commence from the date of default, for " at the moment of the breach no larger sum can be exacted by the creditor." The distinction between the two classes of cases was thus stated by the Madras High Court : " By the cases in this country it is well established that an agreement to pay a sum of money on a given day with interest at a certain rate, with a stipulation that in default the debtor shall thencefonvard pay a higher rate of interest, is strictly enforceable. In such an agreement no question of penalty arises, because it imposes [no] obligation on the debtor to pay a larger sum than what was originally due. In the words of s. 74 of the Contract Act, no sum is named as the amount to be paid in case of such breach. At the moment of the breach no larger sum can be exacted by the creditor, but from that date the terms on which the debtor holds the money become less favourable. By the default he accepts the alternative arrangement of paying a higher rate of interest for the future. On the other hand, where the stipulation is that on default the higher rate shall be payable from the date of the original obligation, the debtor does on default become immediately liable for a larger sum, viz., the difference between the enhanced and the original rate of interest already due " (y). It has been stated above that a stipulation for an increased rate of interest from the date of default is not generally a penalty ; but such a stipulation may in some cases be penal. Whether it is a penalty or not is a question of construction. " It is for the Court to decide on the facts of the particular case whether the stipulation is or is not a stipulation by way of penalty " (z). In each of these cases the decision of the question depends, in effect, upon the construction of the document, and upon ascertaining what the parties really intended by it (a). " Such a contract as to interest must, we think, be held valid where there is no question of fraud or oppression, improper dealing, exorbitant amount, dealing with an ignorant person, or 136 ; Teh Chand v. Morlce (1877) Punj. (c) AbbaJtke Heggadthi v. Kinkiamma Kec. no. 5 ; Honda Mai v. Muhammad Shetty (1906) 29 Mad. 491, 4S6. Baltsh (1879) Punj. Rec. no. 61. (n) Per Maclean, C.J., in Dctio Nath v. (?/) Nanjappn v. Nan jap pa (1888) 12 Nibaran Chandra (1899) 27 Cal. 421, Mad. 161, 166, 167. 424. THE INDIAN CONTRACT ACT. S. 74. the like considerations " (i). For " it is of the utmost importance as regards contracts between adult persons not under disability and at arm's length that the Courts of law should maintain the performance of the con- tracts according to the intention of the parties " (c). On the other hand, the stipulation will be held penal, so as to relieve the debtor from his con- tractual obligation, if "the enhanced rate be such as to lead to the conclusion that it could not have been intended to be part of the primary contract between the parties " (rf), or where there are equitable considera- tions which would render the bargain unconscionable. But the relief, where a proper case was made out for it, was granted by the Court in its equitable jurisdiction, and not under s. 74, for the section as it stood before the amendment was held not to apply to the class of stipulations now under consideration (e). The relief granted, however, was the same whether it was under the Court's equitable jurisdiction or under the provisions of the section (/). And as to Act XXVIII of 1855 (repealing usury laws) it was held that it did not affect the equitable jurisdiction of Courts to relieve against a penalty (e). How far the amendment in the section made by Act VI of 1899 has affected the case law prior to it may be conveniently considered here. The section as it stood before the amendment applied only to those stipulations for enhanced interest when a sum was named in the contract as the amount to be paid in case of breach. It was held not to apply to any stipulation for increased interest when the higher rate commenced from the date of default. Relief, therefore, where such a stipulation was penal, was given not under the provisions of the section, but in the exercise of the Court's equitable jurisdiction. The section as it now stands brings within its operation all stipulations in the nature of a penalty, as will be seen from the words "any other stipulation by way of penalty." The result, there- fore, is that in the case of a stipulation for a higher rate of interest from the date of default relief will now be granted, wherever such a stipulation is penal, under the provisions of this section, and it will not be necessary for Courts to resort to their equitable jurisdiction to grant relief on that score. In other respects, the law as to stipulations for enhanced rate of (b) Surya Narain Singh v. Jogendm Nursing Dyal (1898) 26 Cal. 300 ; Narain Roy (1892) 20 Cal. 360, 364, per Ramendra Hoy v. Serajuddin Ahamcd Pigot, J... cited in 26 Cal. 300, at p. 310. (1898) 2 C. W. N. 234 ; Manoo lieparl v. (c) Walli-s v. Smith (1882) 21 Ch. Div. Durga Churn Saha (1898) 2 C. W. X. 243, cited in 27 Cal. 421, 424. 333 ; Aldvl Gam v. Nandlal (1902) 30 (d~) Per Sargent, C.J., in I'mai-khan v. Cal. 15. Salelthan (1892) 17 Bom. 106, 113, 114. (/) Abdul Gani v, Nandlul (1902) 30 00 Umarkhan v. SaleMtan (1892) 17 Cal. 15, 19, Bom. 106 ; Pardhan Bhulthan Lul v, INTEREST BY WAY OF PENALTY. 329 interest remains what it was under the old section. The Explanation to S. 74. the section is simply a legislative recognition of the proposition laid down in the undermentioned cases (#) that a stipulation for enhanced interest from the date of default may be a stipulation by way of penalty (ft). Illustration (d), which was added in the Act by Act YI of 1899, is an instance of such a stipulation. The increase of interest from 12 to 75 per cent, is of itself so exorbitant as, in the language of Sargent, C.J., " to lead to the conclusion that it could not have been intended to be part of the primary contract between the parties " ('). On the whole the law as to enhanced rate of interest under the section as amended may now be stated as follows : (a) A stipulation for increased interest from the date of the bond is always in the nature of a penalty, and relief will be granted against it. (b) A stipulation for increased interest from the date of default may be a stipulation by way of penalty, and whenever it is so relief will be granted (under the section as amended, and not independently of it as before the amendment). Whether such a stipulation is penal is a question of con- struction dependent upon the considerations set out above. It should be stated that the current of decisions in Calcutta and Madras laying down the distinction between a proviso for retrospective enhancement of interest and a proviso for enhanced interest from the date of default, and treating the former as a penalty, was for some time broken owing to a decision of the Privy Council in BalMshen Das v. Run Bahadur Singh (k). That case related to the construction of a decree which was founded on a solehnama between the parties and to the right of the appellant to execute to the extent of the provisions of that decree when properly construed. The decree was for payment of money by instalments with interest at 6 per cent., and it was construed to provide for three con- tingencies, one of which was that on default of payment of the first instal- ment interest should be paid at 12 per cent, from the date of the decree. The Judicial Committee held that the stipulation for the higher rate of interest from the date of the decree was not a penalty, and added that, even if it were so, the stipulation wa.s not unreasonable, inasmuch as it was a mere stipulation of interest at 12 instead of 6 per cent, per annum in a given state of circumstances. Following this decision, it was held in some (<7) UmarTihan v. Salekhan (1892) 17 347. Bom. 106, 113, 114; Pardhan BkuWian (i) Umarlthan v. SaleMuin (1892) 17 Lai v. Nursing Dyal (1898) 26 Gal. 300, Bom. 106, 113, 114. 310. (&) (1883) 10 Cal. 305; L. R. 10 Irul. (A) Sanltaranarayana Vadkyar v. San- Ap. 162. luimnarayana Ayijar (1901) 25 Mad, 343, 330 THE INDIAN CONTRACT ACT. S. 74. cases (/) that a stipulation in a contract for a higher rate of interest from the date of the contract is not unenforceable, and that it cannot be treated as a penalty, but must be interpreted, as other parts of a written contract should be interpreted, according to the expressed intention of the parties. Those cases, however, are no longer of any authority, and in later cases (m) the decision of the Privy Council was held not to be applicable to the class of cases under consideration (ri), and the Courts reverted to the former view they had taken of s. 74 as originally enacted. So far as the Allahabad High Court goes, there have been only two cases (0) under the old section since the Privy Council decision, and that decision was followed in both of them. In the later of the two cases it was held by a full Bench of that Court that s. 74 as originally enacted did not apply to an agreement to pay alternative rates of interest whether the higher rate was payable from the date of the contract or from the date of default, on the ground that it could not be said in either case that there was a sum named in the contract as the amount to be paid in case of breach (p). (/) Baij Nath Singh v. Shah All Hosaln (1886) 14 Cal. 248 ; Basavayya v. Sub- tarazv (1888) 11 Mad. 294 ; Narayanasami Naidu v. Narayana Ran (1893) 17 Mad. 62. See also Arjan Sill v. Asgar All (1886) 13 Cal. 200, 203, where the note of discord was first struck ; see also Arulu Mastry v. Wahuthu Chinnayen (1864) 2 M. H. C. 205. (m) Kalachand Kyal v. Skib Chunder (1892) 19 Cal. 392, overruling Baij Nath Singh v. Shah All Hosain (1886) 14 Cal. 248 ; Baid Nat-h Das v. Shamanand Das (1894) 22 Cal. 143 ; Pardhan BhuTthan Lai v. Narsing Dyal (1898) 26 Cal. 300 ; Deno Nath v. Nibaran C/iandra (1899) 27 Cal. 421 ; Rameswar Prosad Singh v. Ral Sliam Kishen (1901) 29 Cal. 43 ; Abdul Gani v. Nandlal (1902) 30 Cal. 15 ; Nanjappa v. Nanjappa (1888) 12 Mad. 161 (no reference is made in this case to the earlier case of Basavayya v. Subbarazu (1888) 11 Mad. 294, which followed the Privy Council decision) ; Gopaludu v. Venltataratnam (1894) 18 Mad. 175 ; Sarikaranarayana Vadhyar v. Saiikaranarayana, Ayyar (1901) 25 Mad. 343 ; Annamalai Chatty v. Veerabadram Clietty (1902) 26 Mad. 111. () For reasons see Nanjappa v. Nan- jappa (1888) 12 Mad. 161, 165, 166; Kalachand Kyal v. Shib Chunder (1892) 19 Cal. 392, 396 ; Umarlthan v. Salelthan (1892) 17 Bom. 106, 112. (0) Banwari Das v. Muhammad Mashiat (1887) 9 All. 690 ; Banhe BeJiarl v. Sundar Lai (1893) 15 All. 232. (_fi) See also Baij Nath Singh v. Shah All Hosaln (1886) 14 Cal. 248, where Mitter, J., said : " In either of the cases mentioned above no amount is named in the contract as the amount to be paid in case of breach. It is true that on the date when the breach took place the amount that under the contract would be due on that date to the creditor could be ascer- tained by arithmetical calculation, but that is not a case where it can be said that that amount is named in the contract as the amount to be paid in case of a breach. Then, again, the amount which may be ascertained by such calculations is not the whole amount which is named in the con- tract as the amount to be paid in case of a breach, even if it be conceded that the use of the word ' named ' does not make any difference. The whole amount which in consequence of the breach would be STIPULATIONS FOR COMPOUND INTEREST. 331 The Explanation to the amended section read with illustration (d) makes S. 74. it clear beyond all doubt that the section as amended applies to stipulations for alternative rates of interest, and the newly added words "any other stipulation by way of penalty " are wide enough to comprise cases in which no sum may be named as the amount to be paid in case of breach () Jirij lihulihitn v. Su-mi-ud-dhi Mul Singh v. Kishan Qnpal (1904) 1'unj. (1902) 25 All. 169. Eec. no. 58. 332 THE INDIAN CONTRACT ACT. S. 74. Sundar Koer v. Rai Sham Krishen (x), " compound interest is in itself perfectly legal, but compound interest at a rate exceeding the rate of interest on the principal moneys, being in excess of and outside the ordinary and usual stipulation, may well be regarded as in the nature of a penalty." Thus where a bond provided that interest should be payable at the end of each year at the rate of Es. 1-4 per cent, per mensem, and that in default compound interest should be paid at the increased rate of Rs. 3-2 per cent, per mensem, it was held that the stipulation was one by way of penalty, and the Court allowed compound interest at the same rate as simple interest (y). Similarly it was laid down in an Allahabad case that a stipulation that in default of payment of interest when due the debtor should pay an increased rate of interest as well as compound interest amounts to a penalty (z). The ground of the decision was that the two stipulations put together could not be regarded as a fair agreement with reference to the loss sustained by the lender by reason of the breach of the contract. By the terms of the bond in that case the interest was to be at the rate of 9 per cent, per annum, and was payable yearly, and there was a proviso that if it was not paid when due it should be increased to 15 per cent, per annum, and should be calculated as compound and not as simple interest (a). This case was dissented from by the Madras High Court. The bond in that case provided that, if any instalment of interest (which was 2 per cent, per mensem) was not paid on the due date, the debtor should pay compound interest at the same rate " from the expiry of the instalment," and that, if the principal was not paid within a year, he should " from that date " pay interest at an enhanced rate, namely, 3 per cent, per mensem. The Court said that the only question was whether an agreement to pay an increased rate of interest as well as compound interest amounted to a penalty, and held that there was nothing penal in the bond, putting the decision on the ground that, if parties enter into extortionate bargains with their eyes open, they are not entitled to relief unless the unfair nature of the transaction was not known to them, advantage having been taken of youth, ignorance, or credulity (b). GO (1906) 34 Cal. 150, at p. 158, L. K. (1886) 8 All. 185. 34 Iiul. Ap. 9. () The Court reduced the interest to (//) Bald Xath Dug v. Shtimanand Das Us. 9 per cent, per annum reckoned at (1894) 22 Cal. 143, 155, 156, followed in compound interest with yearly rests up to Rameswar Protad Singh v. Rai Sham the due date of payment. Kishen (1901) 29 Cal. 43, 51 ; Annanialai (i) Appa Itau v. Suryunarayana Chetty v. Veerabadram Clietty (1902) 26 (1887) 10 Mad. 203. The terms of the Mad. 111. bond as respects interest were as follows : (--) Dip Narain Rai v. Dipati Rai " Should I so fail to pay the amount of STIPULATIONS FOR COMPOUND INTEREST. 333 No reference was made in either of these cases to s. 74 of the Act. S. 74. It is submitted that the facts in the two cases were quite different and gave rise to different questions. In the Allahabad case the debtor became liable on default to pay a higher rate of interest not from the date of default, that is, the date on which the instalment of interest lecame due, but, so far as it appears from the report, from the date of the commencement of each instal- ment of interest (c). This stipulation would of itself be now regarded as penal independently of the condition for payment of compound interest. But the liability on default under the terms of the bond was not only to pay the enhanced rate from the date of the commencement of each instal- ment, but also compound interest at that rate a stronger case than the one which merely provides for compound interest at a rate higher than simple interest. In the Madras case, on the other hand, the first stipula- tion for compound interest at the same rate as simple interest was lawful, though the second stipulation for payment of interest at an increased rate from the date of default (d) may or may not be one by way of penalty according to the circumstances of the case (see Explanation to the section, p. 321, above). The distinction has been explained by the Judicial Committee : " The Indian Courts have invariably held that where (as in the present case) the stipulation is retrospective, and the increased interest runs from the date of the bond and not merely from the date of default, it is always to be considered as a penalty, because an additional money payment in that case becomes immediately payable by the mortgagor. Their Lordships accept that view of the statute " (e). A stipulation that interest in arrear shall be capitalised and added to the principal sum and that the whole shall carry interest at the contract rate is not by way of penalty (/). interest, I shall pay the interest at 2 per struction would be that the higher rate cent, per month, as stated above, on the was to be paid from the date fixed for the amount of the interest also from the payment of the instalments with compound expiry of the instalment. I shall pay the interest, in which event the case would be principal, the amount of interest due, and one of payment of compound interest at a the amount of interest thereon within one rate higher than that of simple interest, year. Should I fail to clear a year hence (d~) The words in the bond are " from the whole amount due to you, I shall pay that date," which obviously mean " from you the whole of the amount due together the expiration of the year " being the with interest on it from that date at the period of the loan. rate of 3 per cent, per month." See (e} Sundar Koer v. Sham Krishen (1906) Abbakke Heggadthi v. KinMamma Shetty L. K. 34 Ind. Ap. 9, 17, 34 Cal. 150. (1906) 29 Mad. 491, at p. 496. (/) Sarju Prasad v. Beni MadJio (1883) (c) The terms of the bond are not set All. W. N. 208. out in the report. The only other con- 834 THE INDIAN CONTRACT ACT. S. 74. III. Stipulations for payment of interest if principal not paid on due date. We next proceed to consider cases where the bond does not provide for the payment of two rates of interest, one lower and the other higher, but for the payment of interest at one specified rate if the principal money or part thereof is not paid within a stipulated period. The decisions on the subject are not quite uniform and require examination. But before doing so it may be as well to note the provisions of Act XXVIII of 1855, as they have a close bearing on the subject. That Act abolished all usury laws, and s. 2 thereof provides that " in any suit in which interest is recoverable the amount shall be adjudged or decreed by the Court at the rate (if any) agreed upon by the parties, and if no rate shall have been agreed upon at such a rate as the Court shall deem reasonable." It will have been observed from what has preceded that the provisions of the said Act do not apply, and the Court will not decree interest at the agreed rate where the agreement provides for alternative rates of interest, and the stipulation for the higher rate of interest is one by way of penalty. Such stipulations would now come within the scope of s. 74, and the provisions of the said Act are so far modified by that section (g}. Where, however, there is a stipulation for a single rate of interest, the question arises whether the provisions of s. 2 of Act XXVIII of 1855 invariably apply to all such cases, so that the Court should award the agreed rate of interest, or whether any relief could be granted where such rate appears to the Court to be penal, and if so whether this could be done under s. 74 as now amended. In Motoji v. Shekh ffusen (fi), where a promissory note, after stipulating for payment by monthly instalments without interest, provided for interest at the rate of 75 per cent, per annum in default of payment of any one instalment, it was held by the High Court of Bombay that the stipulation for interest was a penalty. In Pava v. Govind (i) a promissory note provided for repayment of principal without interest within three months from the date thereof, and that in default interest should be paid at 75 per cent, per annum. It was held by the same Court, following Motoji v. Shekh Husen (Tc), that the rate of interest was a penalty, and that Act XXVIII of 1855 did not destroy the equitable jurisdiction of the Courts to relieve against a penalty (/). In () Gokal Chund v. Khwaja Ali (1890) (y) (1903) 31 Cal. 138. See also Punj. Rec. no. 32. But see Kanhaya Lai Krishna Kumar v. Brojo Natli Roy (1903) v. Narain Das (1894) Punj. Eec. no. 99. 7 C. W. N. 876, where a loan of Rs. 300 (.?) (1901) 25 Mad. 343 ; Chintia v. carried compound interest at the rate of Pedda (1902) 26 Mad. 445. (The rate of Rs. 5 per month, and interest was awarded interest in this case was 12 per cent, per at that rate, annum.) RELIEF AGAINST PENALTY. 337 case, therefore, does not belong to the group of cases now under examina- S. 74. tion, but it is noted here, as the Court said that the case was governed by the revised section. It will have been seen that in Motoji v. Shekh Husen (z), Pava v. 6tovmd((t), Bansidharv. Bu Ali Khan (V), and Vythilinga v. Havana (c), cited above, the exorbitant rate of interest was of itself regarded as penal. On the other hand, in Aryan Bibiv. Asyar Ali(d} and Sanlcaranarayana Vadhyar v. Sanlcaranarayana Ayyar (e) the Court declined to grant any relief, though the rate of interest in one case was 150 per cent, per annum, and in the other it was 180 per cent. The effect of these two decisions as well as the decision in Prayag v. Shyam Lai is that, the rate of interest having been agreed upon between the parties, it should be allowed under the provisions of Act XXVIII of 1855, and the mere fact that the rate of interest is exorbitant is no ground of relief unless the transaction amounts to an " unconscionable bargain." The principle of these decisions, it is submitted, is not sound, for, following it to its logical consequences, any rate of interest, however exorbitant, would not be regarded as penal. The correct principle, it is conceived, is the one laid down in the first group of the cases mentioned above, namely, that relief should be granted whenever the rate of interest appears to the Court to be penal notwithstanding the provisions of the Act. This view was recently adopted by the High Court of Calcutta in Miajan Patari v. Abdul Juhhar(f), where it was held, dissenting from Arjan Bibi v. Asgar Ali(d} and Sanlcaranarayana Vadhyar v. Sanlcaranarayana Ayyar (e), that a stipulation for the payment of interest at the rate of 75 per cent, per annum from the date of the bond, on failure to pay the principal sum in two instalments on the dates fixed, was in the circumstances of the case a penalty. Before the amend- ment of the section relief was properly granted by Courts in the class of cases under consideration in the exercise of their equitable jurisdiction, for s. 74 as originally enacted could not apply to the case. Whether after the amendment relief should be granted under the amended section is open to some doubt. On the one hand, the section as now amended extends to " any . . . stipulation by way of penalty," and this expression is wide enough to cover the class of cases now under consideration ; on the other hand, the subject-matter of the section relates to what is known in English law as the doctrine of penalty and liquidated damages, and stipulations for interest of the class we are now dealing with do not fall (c) (1869) 6 B. H. C. A. C. 8. (. App. Ca. at p. 653, though not precisely SALE DISTINGUISHED FROM BAILMENT AND AGENCY. 347 this seems of little importance in jurisdictions where the old forms of Ss. 77, 78. action are abolished or have never existed. Sale or bailment. In some cases there may he doubt at first sight whether there is a sale of goods (or, if the equivalent is not in money, barter) or a bailment. Here the test is whether the party delivering the goods is entitled to the specific return of what he has delivered. If not, there is no bailment, although the party may be entitled to claim goods of like amount and quality, or goods or money at his election, for example, where wheat of several owners is delivered to a miller, who may grind and sell it, the parties describing the transaction as " storage " (/). Sale or hire. An agreement by which the hirer of a sewing machine agrees to pay regularly a fixed monthly rent for the machine, and which provides that the hirer may at any time during the hire become the pur- chaser of the machine by payment in cash of the price mentioned in the agreement, provided the payments of hire are regularly and duly made, is an agreement for hire, and it does not become one for purchase until the specified conditions are fulfilled (u). Sale or agency. A question may arise whether a consignee of goods is the consignor's agent to sell the goods or a buyer of the goods from him. Every case must depend on its own facts, and the facts of a " sale or return " business (as to which see more under s. 78) may be very near those of a del credere agency. The words used by the parties are not conclusive. Thus there are trades in which the so-called agent is well known to be a retailer. If a consignee is bound to account to the consignor for goods sold at a fixed rate and within a fixed time, but may dispose of them on any terms he chooses to make, calling him an agent will not make him so ; he is a buyer (v). On the other hand, one who guarantees payment of the price for goods disposed of by him is an agent ; for if he were a buyer he would be directly liable for the price, and a man cannot guarantee his own debt (). A contract of sale is compatible with a distinct collateral contract between the same parties as to the buyer's subsequent use or disposal of the thing sold (y). 78. Sale is effected by offer and acceptance of ascer- tained goods for a price. Sale how effected. or of a price for ascertained goods, (t) South Australian Insurance Co. v. 397, especially the judgmentof Mellish.L.J. Randell (1869) L. K. 3 P. C. 101. (x) Exparte Bright (1879) 10 Ch. Div. (u) Gopal Tukaram v. Sorabji Nusser- 566. wanji (1904) 6 Bom. L. E. 871. (y) McBain v. Wallace (1881) 6 App. 00 Exparte White (1871 L. R. 6 Ch. Ca. 588. 848 THE INDIAN CONTRACT ACT. s - 78. together with payment of the price or delivery of the goods; or with tender, part-payment, earnest or part- delivery; or with an agreement, express or implied, that the payment or delivery, or hoth, shall be postponed. Where there is a contract for the sale of ascertained goods, the property in the goods sold passes to the buyer when the whole or part of the price or when the earnest is paid or when the whole or part of the goods is delivered. If the parties agree, expressly or by implication, that the payment or delivery, or both, shall be postponed, the property passes as soon as the proposal for sale is accepted. Illustrations. (a) B. offers to buy A.'s horse for 500 rupees. A. accepts B.'s offer, and delivers the horse to B. The horse becomes B.'s property on delivery. (b) A. sends goods to B., with the request that he will buy them at a stated price if he approves of them, or return them if he does not approve of them. B. retains the goods, and informs A. that he approves of them. The goods become B.'s when B. retains them. (c) B. offers A., for his horse, 1,000 rupees, the horse to be delivered to B. on a stated day, and the price to be paid on another stated day. A. accepts the offer. The horse becomes B.'s as soon as the proposal is accepted. (d) B. offers A., for his horse, 1,000 rupees on a month's credit. A. accepts the offer. The horse becomes B.'s as soon as the offer is accepted. (e) B., on the 1st January, offers to A., for a quantity of rice, 2,000 rupees, to be paid on the 1st March following, the rice not to be taken away till paid for. A. accepts the offer. The rice becomes B.'s as soon as the offer is accepted. History of the law. This section is intended to represent, and may be taken as representing, the modern Common Law, though the wording of the last paragraph does not fully show how readily an agreement to give credit is inferred. In fact, the law has gone through several stages. The rule of early Germanic law, followed in England till the fifteenth or late fourteenth century, was that nothing short of actual delivery would pass property, whether the transaction were gift, barter, or sale (2). But in the fourteenth century it was established that a buyer who had given security by deed for payment of the price acquired the right to immediate possession, (.:) Bracton, fo. 61 b. TRANSFER OF PROPERTY IN GOODS. 349 a right which he might enforce either by action or by taking the goods S. 78. peaceably if he could ; and in the fifteenth century this was extended to the case of an informal bargain (a). As the immediate right to possess a thing was constantly spoken of as " property," it is not difficult to understand how the rule that the contract itself passes the property came to be accepted. Down to the early part of the seventeenth century it was thought that an agreement to give credit must be express ; but, as Lord Blackburn wrote nearly sixty years ago, " in modern times (at least in commercial transactions) the parties are taken to contemplate an immediate transfer of the property in the goods and an immediate obligation to pay the price, with a reason- able time for delivery and payment, unless there be something to show a different intention " ( b). This is the rule in the only shape which now has to be considered for any practical purpose. A similar rule, notwithstanding that the Roman law is otherwise, has been adopted for not only rnoveable, but immoveable, property in France and in those jurisdictions (including, among British possessions, the Province of Quebec and Mauritius) where the modern French codes have been introduced or imitated. Contracts for the sale of immoveable property, however, are guarded by requirements of form (c). The following observations of Parke, B., are classical, though now elementary : " I take it to be clear that by the law of England the sale of a specific chattel passes the property in it to the vendee without delivery. The general doctrine that the property in chattels passes by a contract of sale to a vendee without delivery is questioned in Bailey v. Culver-well (d) in a note by the reporters ; but I apprehend the rule is correct as confined to a bargain for a specific chattel. Where there is a sale of goods generally, no property in them passes till delivery, because until then the very goods sold are not ascertained ; but where, by the contract itself, the vendor () Ames in Harv. Law Kev. viii. 259. posely avoid the questions raised iii the Thus the truth lies between Serjeant Common Law by a gift of chattels without Manning, who suggested that the Common delivery, as they are outside the present Law rule was due to comparatively recent undertaking and by no means free from misunderstanding, and Lord Blackburn, difficulty. who proved against Manning that it was (tf) Hence particular rules as to specific recognised in the fifteenth century, and performance are not needed in modern inferred that it had " existed since English French law, for the purchaser has by law began " : Blackburn on Sale, ed. force of the contract itself all the rights Graham, 261 sqq. The treatment of this and remedies of an owner. This has been point in Cochrane v. Moore (1890) 25 overlooked by one or two learned English Q. B. Div. at p. 71, where the question writers. before the Court was of the effect of a (d~) 2 Man. & Ky. 566 (by Serjeant gift without delivery, is not adequate. Manning) ; see Com. Dig. Biens, D. 3. (7>) Blackburn on Sale, ed. Graham, See note (a) above, p. 172 (p. 149 of original edition). I pur- 350 THE INDIAN CONTRACT ACT. S. 78. appropriates to the vendee a specific chattel, and the latter thereby agrees to take that specific chattel, and to pay the stipulated price, the parties are then in the same situation as they would be after a delivery of goods in pursuance of a general contract. The very appropriation of the chattel is equivalent to delivery by the vendor, and the assent of the vendee to take the specific chattel, and to pay the price, is equivalent to his accepting possession. The effect of the contract, therefore, is to vest the property in the bargainee " (e). The corresponding matter in the English Sale of Goods Act (ss. 1 6 sqq.) is quite differently arranged, and minute comparison would not be profitable. Delivery. As to what amounts to delivery, see ss. 90 92. In the present section the words " when the whole or part of the goods is delivered " must be read with s. 92, and mean " when part is delivered in progress of the delivery of the whole " (/). Thus where the defendant agreed to purchase from the plaintiff five bales of chrome orange twist, " or any part thereof that may be in a mercantile condition, ex Cily of Cambridge, or other vessel or vessels," with specific marks and numbers, each bale containing 500 pounds, at so much per pound, to be paid for on or before delivery, it was held that payment for, and delivery of, one bale did not amount to a delivery of part within the meaning of this section so as to pass to the defendant the property in the remaining four bales (//). As to the transfer of ownership in shares in companies, see Indian Companies Act VI of 1882 ; as to negotiable instruments, see Act XXY1 of 1881. When property passes. "Where the defendant agreed to sell paddy to the plaintiff on the terms that the plaintiff should pay 1,000 rupees in advance, and the balance of the price on delivery, and it was agreed that an assignment of a debt for 100 rupees and a hoondi for 900 rupees should be accepted as payment of the advance, it was held by the High Court of Madras that the property in the goods passed to the plaintiff on assignment of the debt and delivery of the hoondi by the plaintiff to the defendant, and the plaintiff was entitled to damages for the wrongful sale of the paddy to a third person (Ji). If the parties to a contract for the sale of ascertained goods agree that the payment for and delivery of the goods are to be postponed, the property in the goods passes to the buyer as soon as the proposal for sale is accepted. 00 Dixon v. Yates (1833) 5 B. & Ad. (1887) 15 Cal. 1, 6. at p. 340, 39 R. R. at pp. 497, 498, (.0 Shepherd v. Hurnxon (1871) L. R. 5 H. L. 116, per Lord Westbury, at p. 128. The language of the original is here pre- served, with only such alteration as is required to make the form of the statement general. DELIVERY TO CARRIER. 365 The following lucid statement of the rules as to " appropriation " was g. 83. judicially delivered by the late Lord Justice Cotton in 1878 : " Under a contract for sale of chattels not specific the property does not pass to the purchaser unless there is afterwards an appropriation of the specific chattels to pass under the contract, that is unless both parties agree as to the specific chattels in which the property is to pass, and nothing remains to be done in order to pass it. In the case of such a contract the delivery by the vendor to a common carrier, or (unless the effect of the// shipment is restricted by the terms of the bill of lading) shipment on board* a ship of, or chartered for, the purchaser, is an appropriation sufficient to| pass the property. If, however, the vendor, when shipping the articles which he intends to deliver under the contract, takes the bill of lading to his own order, but does so not as agent or on behalf of the purchaser, but on his own behalf, it is held that he thereby reserves to himself a power of disposing of the property, and that consequently there is no final appro- priation, and the property does not on shipment pass to the purchasers. Wfien the vendor on shipment takes the bill of lading to his own order, he has the power of absolutely disposing of the cargo, and may prevent the purchaser from ever asserting any right of property therein ; and accordingly in Wait v. Baker (o), Ellershaw v. Magniac (p), and Gabarron v. Kreeft (q) (in each of which cases the vendors had dealt with the bills of lading for their own benefit), the decisions were that the pur- chaser had no property in the goods, though he had offered to accept bills for or had paid the price. So if the vendor deals with or claims to retain the bill of lading in order to secure the contract price, as when he sends forward the bill of lading with a bill of exchange attached, with directions that the bill of lading is not to be delivered to the purchaser till acceptance or payment of the bill of exchange, the appropriation is not absolute, but until acceptance of the draft, or payment or tender of the price, is con- ditional only, and until such acceptance, or payment, or tender, the property in the goods does not pass to the purchaser ; and so it was decided in Turner v. Trustees of Liverpool Docks (r), Shepherd v. Harrison (s), Ogg v. Shuter (t). But if the bill of lading has been dealt with only to (o) 2 Ex. 1. See note (/), p. 364, shipped on the buyer's ship does not above. prevail over the terms of a bill of lading (/) (1843) G Ex. 570 n., 86 R. R. 398 made out to the seller's order, (form of bill of lading held conclusive in (*) L. R. 4 Q. B. 196; 5 H. L. 116. absence of contrary indication). See note (/;), p. 364, above. (q} L. R. 10 Ex. 274. See note (/), (t) 1 C. P. Div. 47 (effect of bill of p. 355, above. lading to shipper's order is to reserve (/) 6 Ex. 543. The facts here were right not only of possession, but of dis- somewhat complicated, but the main posal of the goods as against a buyer in point is that the fact of goods being default). 366 THE INDIAN CONTRACT ACT. S. 83. secure the contract price, there is neither principle nor authority for holding that in such a case the goods shipped for the purpose of completing the contract do not on payment or tender by the purchaser of the contract price vest in him. When this occurs there is a performance of the con- dition subject to which the appropriation was made, and everything which, according to the intention of the parties, is necessary to transfer the property is done ; and in my opinion, under such circumstances, the pro- perty does on payment or tender of the price pass to the purchaser " (u). In this case, accordingly, where the bills of lading had been handed to the bankers who discounted the bill of exchange drawn against the cargo, and this was done only to secure payment of the bill of exchange at maturity, it was held that the buyer was entitled to the goods on offering to pay the bill of exchange, ajid that his tender constituted a final appropriation vesting the property in him. The following statements by the late Mr. Benjamin have become authoritative in England by high judicial approval : " Where goods are delivered by the vendor in pursuance of an order to a common carrier for delivery to the buyer, the delivery to the carrier passes the property, he being the agent of the vendee to receive it, and the delivery to him being equivalent to a delivery to the vendee. " Where goods are delivered on board of a vessel to be carried, and a bill of lading is taken, the delivery by the vendor is not a delivery to the buyer, but to the captain as bailee for delivery to the person indicated by the bill of lading as the one for whom they are to be carried " (#). On the other hand, if the seller sends out bills of lading which make the goods deliverable to the buyer's order, this is a strong confirmation of the normal presumption that delivery to a carrier, and especially a ship- master, passes property. " We conceive it is perfectly settled," said the Court of Appeal in England in 1876, "that if a consignor in such a case wishes to prevent the property in the goods and the right to deal with the goods whilst at sea from passing to the consignee, he must, by the bill of lading, make the goods deliverable to his own order, and forward the bill of lading to an agent of his own. If he does not do that, he still retains the right of stopping the goods in transition [as to which see ss. 99 106, pp. 391 407, below], but subject to that right the property in the goods and the right to the possession of the goods is in the consignee. . . . () Per Cotton, L.J., Mlrabita v. Chelmsford in Shepherd v. Jfui-rlxtm, Imperial Ottoman Bank (1878) 3 Ex. Div. L. R. 5 H. L. at p. 127. The whole series at pp. 172, 173. of rules propounded in the continuation (#) Benjamin on Sale, Book II. Chap. VI. of the passage may be profitably consulted ad Jin., p. 400 in 5th ed., adopted by Lord APPROPRIATION OF GOODS SOLD. 367 [In Shepherd v. Harrison (y)\ the consignor did take the precaution of S. 83. making the goods deliverable to his own ordei 1 , and of forwarding the indorsed bill of lading, together with the bill of exchange, to an agent of his own. The agent forwarded the bill of lading and the bill of exchange in the same letter to the consignee, and requested him to accept the bill of exchange and return it. Under these circumstances it was held by the House of Lords that the consignee had no right to keep the bill of lading without accepting the bill of exchange. This case is no authority for holding that, if the property in the goods had already passed, the property would revest on the bills of exchange being refused acceptance " (2). It may be stated on the whole, in a summary way, that generally delivery to a carrier or bailee who receives the goods for transmission to the buyer appropriates those goods to the contract ; but the seller may exclude the operation of this rule by reserving the power of disposal. In particular the appropriation may be and constantly is made conditional on payment or tender of the price (a), or acceptance of a bill of exchange sent forward with the bill of lading ; this last is quite common practice. In such cases the property passes only when the condition is satisfied. The fact of the seller taking a bill of lading to his own order is strong evidence that the appropriation is conditional; indeed, the rule that such is the legal effect is quite as definite and important as the primary rule as to the effect of unconditional delivery ; and the use of this precaution by the seller throws on the buyer the burden of showing that the appropriation was intended to be final. This may be shown, for example, if the result of the circumstances and course of dealing of the parties is that the sellers took the bill of lading in their own name only because they were not quite sure of the construction of the buyer's acceptance of their offer, Avhereas in fact he did mean to accept the cargo, and acted accordingly (&). It should be noted that, in case of difference, the terms of the bill of lading prevail over those of an invoice, and, it seems (c), over any inference from ambiguous terms in any other document evidencing the contract. "It is perfectly well settled that . . . the entry upon the invoice stating the goods to be shipped on account and at the risk of the consignee is .not conclusive, but may be overruled by the circumstance of the jus (y) L. R. 5 H. L. 116 ; note(rc). p. 364, (V) Joyce v. Swann (1%W) 17 C. B. N. S. above. 84. There was no question between the (X) Ex purte Banner (1876) 2 Ch. Div. parties to the sale, but only between the 278, 288, 289. buyer and underwriters as to insurable (a) For a case of conditional appro- interest, the cargo having been lost by priation in dealing with goods on land, wreck. see Godts v. Rose, referred to under s. 90, (c) See Ogg v. Shuter (1875) 1 C. P. illustration (f), p. 375, below. Div. 4.7. 368 THE INDIAN CONTRACT ACT. Ss. 83, 84. disponendi being reserved by the shipper through the medium of the bill of lading " (d). Attention to the principles established under the present head will be found to remove many of the difficulties which arise on the more special question of an unpaid seller's right to stop goods in transit. 84. Where the goods are not ascertained at the time of making the contract of sale, and by the terms Ascertainment of . goods by seller's of the contract the seller is to do an act with sclcc tion reference to the goods which cannot be done until they are appropriated to the buyer, the seller has a right to select any goods answering to the contract, and by his doing so the goods are ascertained. Illustration. B. agrees with A. to purchase of him at a stated price, to be paid on a fixed day, 50 maunds of rice out of a larger quantity in A.'s granary. It is agreed that B. shall send sacks for the rice, and that A. shall put the rice into them. B. does so, and A. puts 50 maunds of rice into the sacks. The goods have been ascertained \_AHridge v. Johnson, more fully stated as supplementary illustration No. 2 to s. 83, p. 362, above]. It is rather difficult to see why this is a separate section; the proposition appears to be subordinate to the principle laid down in s. 83. Presumably it was intended to declare existing law, but to the present writer it seems by no means clear that the English authorities warrant the statement in this positive and unqualified form. However, the result is probably the same in almost every case that is likely to occur in the course of business. This section does not appear to have been judicially considered. Perhaps this is the best place to observe that failure on the seller's part to satisfy the conditions required for ascertaining and appropriating the goods contracted for cannot be remedied in the buyer's favour by construction of law on the ground that the seller ought to have done what he did not. Where a seller in effect refuses to appropriate a particular cargo to the contract, taking bills of lading to the order of a real or fictitious nominee of his own, his conduct may be a breach of contract in the circumstances, but property in that cargo will none the more be transferred for that reason (e). (" '' Illustrations. (a) A. contracts to sell to B., for a stated price, all the indigo which shall be produced at A.'s factory during the ensuing year. A., when the indigo has been manufactured, gives B. an acknowledgment that he holds the indigo at his disposal. The ownership of the indigo vests in B. from the date of the acknowledgment. (b) A., for a stated price, contracts that B. may take and sell any crops that shall be grown on A.'s land in succession to the crops then standing. Under this contract, B., with the assent of A., takes posses- sion of some crops grown in succession to the crops standing at the time of the contract. The ownership of the crops, when taken possession of, vests in B. [In England a grant of a tenant's growing crops and all his unexpired tenant right and interest has the same effect : Fetch v. Tutftt(1846) 15 M. & W. 110.] (c) A., for a stated price, contracts that B. may take and sell any crops that shall be grown on his land in succession to the crop then standing. Under this contract, B. applies to A. for possession of some crops grown in succession to the crops which were standing at the time of the contract. A. refuses to give possession. The ownership of the crops has not passed to B., though A. may commit a breach of contract in refusing to give possession. Sale of goods to be produced in future. Logically this section is covered by s. 82. If a contract of sale cannot transfer ownership in existing but unascertained goods without some act appropriating them to the contract, much less can it have any such effect as regards goods not in existence. But in English authorities the rule appears as a distinct and wider rule in the law of property. " It is a common learn- ing in the law that a man cannot grant or charge that Avhich he hath not " (o). But future products of existing property can be granted. Of such things the grantor is said to have a potential possession. " He that hath [the land] may grant all fruits that may arise upon it after, and the property shall pass so soon as the fruits are extant " (p). This extends only to natural produce, and not to after-acquired stock in trade, or the like. The produce must be of existing property. " A man cannot grant all the wool that shall grow upon his sheep that he shall buy hereafter " (q). (0) Perkins, Profitable Book, Grants, cannot make a binding contract to sell pi. 65 ; per Cur., Lunn v. Thornton (1845) and deliver the wool when he has it, but 1 C. B. 379, 386, 68 R. R. at p. 727. that such a contract will create only per- (p) Orantham v. Jfawley, Hob. 132 ; sonal rights and not a right in rein to the Waddington v. Bristow, 2 Bos. & Pul. wool promised. See Sir M. Chalmers's 452. comment, Sale of Goods Act, p. 19.* (j) 2b. This does not mean that he CONTRACT FOR FUTURE DELIVERY. 373 Accordingly a bill of sale purporting to comprise all the goods "now Ss. 87, 88. remaining and being, or which shall at any time hereafter remain and be," in or about the grantor's house at Z., does not of itself pass property in after-acquired goods, and can be made to apply to them only by some new specific act appropriating them to the grant (r). For examples of such appropriation see on s. 83, p. 361, above. These rules do not apply in English law to equitable assignments by way of security or otherwise ; but inasmuch as such an assignment does not at any time transfer ownership, but only a right on the part of the assignee to obtain the benefit of the right which has been assigned to him by the assignor, the subject is not properly before us here, and it will suffice to refer to a few passages of Lord Macnaghten's judgment in what is now the leading case (s) : " It has long been settled that future property possibilities and expectancies are assignable in equity for value. . . . To effectuate the intention an assignment for value, in terms present and immediate, has always been regarded in equity as a contract binding on the conscience of the assignor, and so binding the subject-matter of the con- tract when it comes into existence, if it is of such a nature and so described as to be capable of being ascertained and identified. . . . The truth is that cases of equitable assignments or specific lien, where the considera- tion has passed, depend on the real meaning of the agreement between the parties. The difficulty, generally speaking, is to ascertain the true scope and effect of the agreement. When that is ascertained you have only to apply the principle that equity considers that done which ought to be done if that principle is applicable under the circumstances of the case." Such applications are liable to be complicated by the existence of imperative statutory rules as to particular kinds of transactions or dealings with particular kinds of property, as in England the Bills of Sale Acts ; and care must be taken not to assume too hastily that the general principle will have its normal operation in any given state of facts. 88. A contract for the sale of goods to be delivered at contract to S eii a fllture da 7 is binding, though the goods are Stare dly^'gooda not m tne possession of the seller at the time "eiion^date 1 ^ 8 " ^ ma ^i Q g the contract, and though, at that contract. time, he has no reasonable expectation of acquiring them otherwise than by purchase. (?) Luhit v. Thornton, note (V), p. 372, 13 App. Ca. 523, at pp. 543, 547. See also above. Brandt 's Sons fy Co. v. Dunlop Rubber Co., 0) Tailby v. Official Receiver (1883) Ltd. [1905] A. C. 454. 374 THE INDIAN CONTRACT ACT. Ss. 88, 89. Illustration. A. contracts, on the 1st January, to sell B. 50 shares in the East Indian Railway Company, to be delivered and paid for on the 1st March of the same year. A., at the time of making the contract, is not in possession of any shares. The contract is valid. Future delivery. Probably it would have been thought needless to declare this rule but for the case of Hibblewhite v. McMorine (1839) 5 M. & W. 462, the head-note of which is reproduced, with a little condensa- tion, by this section. There an attempt was made to maintain the contrary, on the authority of a decision of Lord Tenterden at Nisi Prius, founded on some ground of supposed public policy ; but, as Alderson, B., observed, if such a ruling were followed, "it would put an end to half the contracts made in the course of trade." The facts were similar to those given in the illustration. Shortly afterwards the decision was confirmed in a case involving other points also (t). No one has thrown any doubt on it since. 89. Where the price of goods sold is not fixed by the contract of sale, the buyer is bound to pay the Determination of . price not fixed by seller such a price as the Court considers contract. n reasonable. Illustration. B., living at Patna, orders of A., a coachbuilder at Calcutta, a carnage of a particular description. Nothing is said by either as to the price. The order having been executed, and the price being in dispute between the buyer and the seller, the Court must decide what price it considers reasonable. " A contract for tire sale of a commodity in which the price is left un- certain is in law a contract for what the goods shall be found to be reasonably worth " (), said Tindal, C.J., on facts resembling those of the illustration. What is a reasonable price is a question of fact to be determined according to the circumstances of each particular case. Where the goods are such that there is a market price for them, the market price will be evidence of what is a reasonable price between the parties, though not conclusive, as accidental circumstances may make the current price unreasonable in the particular transaction (x). A subsequent fixing of the price by agreement (0 Mortimer v. Me Gallon (1840) 6 Willes, J., in Joyce v. Sioann, 17 C. B. M. & W. 58, 55 R. R. 503, 513, 517, 518. N. S. at p. 102. (tt) Hoadly v. Me Inline (1834) lOBing. (x) Acebal v. Levy (1834) 10 Bing.376 482, 38 R. R. 510, 514 ; confirmed (not 38 R. R. 469, 475. that further authority, is needed) by DELIVERY. 375 of the parties is very strong evidence of what they think, and therefore of Ss 89, 90. what for them is reasonable. On principle it seems to be strictly nothing more, unless the circumstances are such that it operates as a novation. But no question of practical importance appears to arise on this. Delivery. 90. Delivery of goods sold may be made by doing Delivery how anything which has the effect of putting them in the possession of the buyer, or of any person authorised to hold them on his behalf. Illustrations. (a) A. sells to B. a horse, and causes or permits it to be removed from A.'s stables to B.'s. The removal to B.'s stable is a delivery. [Elmore v. Stone ((1809) 1 Taunt. 458 ; 10 E. E/578) was a stronger case. There it was held sufficient delivery -where the seller agreed at the buyer's request to keep the horse at livery, and moved it into another part of his own stables.] (b) B., in England, orders 100 bales of cotton from A., a merchant of Bombay, and sends his own ship to Bombay for the cotton. The putting the cotton on board the ship is a delivery to B. (c) A. sells to B. certain specific goods which are locked up in a godown. A. gives B. the key of the godown in order that he may get the goods. This is a delivery. (d) A. sells to B. five specific casks of oil. The oil is in the ware- house of A. B. sells the five casks to C. A. receives warehouse rent for them from 0. This amounts to a delivery of the oil to C., as it shows an assent on the part of A. to hold the goods as warehouseman of C. [Hurry v. Mangles (1808) 1 Camp. 452 ; 10 E. E. 727 (y).] (e) A. sells to B. 50 maunds of rice in the possession of C 1 ., a warehouseman. A. gives B. an order to 0. to transfer the rice to B., and C. assents to such order, and transfers the rice in his books to B. This is a delivery. [The normal case, assumed as such in all the decisions on more complex facts.] (f) A. agrees to sell B. five tons of oil at 1,000 rupees per ton, to be paid for at the time of delivery. A. gives to 0., a wharfinger, at whose wharf he has twenty tons of oil, an order to transfer five of them into the name of B. C. makes the transfer in his books, and gives A.'s clerk a notice of the transfer for B. A.'s clerk takes the transfer notice to B., and offers to give it him on payment of the price of the (y) At the date of this case the dis- judgment both say, erroneously according tinction between an unpaid vendor's lien to modern usage, that the right to stop in on goods remaining in his possession and transitu was at an end. See further on the right to stop in transit was not yet this case below, understood, and the head-note and the 376 THE INDIAN CONTRACT ACT. S. 90. oil. B. refuses to pay. There has been no delivery to B., as B. never assented to make 0. his agent to hold for him the five tons selected by A. [Even if the wharfinger, after the seller has notified him not to deliver the oil, does deliver it to the buyer, this is not a delivery under the contract, and does not pass either property or the right to posses- sion : Oodts v. Rose (1855) 17 C. B. 229. In such a case the goods have never been ascertained (see the judgment of Willes, J.).] Additional Illustrations. A. agrees with B. to sell B. a horse. Thereupon A. asks B. to lend him the horse for a short time. B. assents and leaves the horse in A.'s custody. This is a delivery to B. [Marvin \. Wallace (1856) 6 E. & B. 726.] B. agrees with A. to buy a horse from him for Rs. 500, and to fetch it away on a day named, the bargain being for ready money. Shortly before the day named B. comes back, rides the horse, and asks A. as a favour to keep it for him another week, saying that at the end of the week he will call and pay for it. Before the end of the week the horse dies. There has been no delivery and no transfer of ownership, and the loss must be borne by A. [Tempest v. Fitzgerald (1820) 3 B. & Aid. 680 ; 22 R. R. 526.] Acceptance and receipt. In English law a contract for the sale of goods of the value of 107. or upwards is, by statute, not enforceable unless "the buyer shall accept part of the goods so sold and actually receive the same," or satisfy one of other alternative conditions not now material (z). Hence there have been many decided cases as to what amounts to acceptance and receipt for this purpose. There have also been many decisions on the question of what amounts, apart from the statute, to a delivery transferring possession from the seller to the buyer, which question may arise in various ways either between the parties or by reason of adverse claims of third persons. The " actual receipt " of the Statute of Frauds appears, on the whole, to correspond to the " delivery " of the present section, regarded, however, from the buyer's point of view. Acceptance is something more, namely, recognition of certain goods as part of the goods sold under the contract in question, " such a dealing with the goods as amounts to a recognition of the contract." Whether the buyer's conduct satisfies this description is a question of fact. It may or may not also be an appropriation to the contract of goods previously unascertained, and it need not amount to an admission that the goods are according to contract (a). Acceptance and receipt, taken together, 0) Sale of Goods Act, 1893. s. 4, repro- (a) Pagev. Morgan (1885) 15 Q. B. Div. ducing in substance the 17th section of 228 (see per Bowen, L.J., at p. 233) ; the Statute of Frauds. On the definition Taylor v. Smith [1893] 2 Q. B. 65, C. A. ; of acceptance, see sub-s. 3. Abbott v, Wolsey [1895] 2 Q. B. 97, C. A, SYMBOLIC DELIVERY. 377 seem to mean that the buyer has assumed possession of some part of the S. 90. goods with reference to the contract of sale and as being appropriated thereto. Although the Statute of Frauds is happily not in force in British India, principles of general application are often involved in English cases decided upon the statute, and therefore some acquaintance with its provisions (now re-enacted and in part made clearer by the Sale of Goods Act) is still indispensable to Indian practitioners, at any rate in the High Courts, in order to understand which parts of the English judgments turn only on the language of the statute and which have an independent value. " Symbolic " delivery. Illustration (c) treats the delivery of the key to the purchaser as transferring possession because, and only because, it gives him actual control of the place where the goods are, and thereby of the goods themselves. This is believed to be the correct view in English law, notwithstanding the language that has sometimes been used about symbolic delivery. As Lord Hardwicke said more than a century and a half ago, " delivery of the key of bulky goods . . . has been allowed as delivery of the possession, because it is the way of coming at the possession or to make use of the thing, and therefore the key is not a symbol, which would not do " (6). But delivery of a key may properly be called a symbol in so far as it is an emphatic declaration of intention to transfer control ; in this manner it may be material even in the case of immoveables, where it could have no effect standing alone. A. goes to live in B.'s house with B.'s consent. C., acting under A.'s orders, takes furniture of A.'s to B.'s house, puts it in certain rooms, locks the doors of those rooms, and takes away the key, to the knowledge of B.'s servants and without any objection. This is relevant to show that A. has not delivered the goods to B. to hold as bailee, but, on the contrary, B. has given possession to A. of the rooms in which the goods are placed (c). In the case of goods, the effect of delivering a key, so far as it is effective, is to give actual control of the goods. Delivery of the key of a wharf where timber is lying has been judicially said to carry " manual control " of the timber (d). Nor is this surprising ; for actual possession of partially cleared lands, bulky goods, and so forth, has always been held to be acquired by such control and occupation as the nature of the subject-matter admits (e). This has been admitted to be the governing principle even when the terms " symbol " and " constructive possession " have been, perhaps not quite (&) Ward v. Turner, 2 Ves. Sr. 431 ; 1 (d) Gough v. Everard (1863)1 H. &0. 1. Dick. 170. (e) See Lord Advocate v. Young (1887) (c) Ancona v. Rogers (1876) 1 Ex. 12 App. Ca. at pp. 553, 556. Div. 285. 378 THE INDIAN CONTRACT ACT. S. 90. aptly, used at the same time (/). It is conceived that merely telling a man that the key of a warehouse, etc., is at his disposal is at most a licence, and, as regards property or possession, has no effect at all until he acts on the authority (g). Delivery of a key does not operate as delivery of the goods under the lock if it does not in fact give complete access to them. Where a seller gave the buyer the key of a receptacle in which the goods were, but retained the key of an outer inclosure, it was held without difficulty that the buyer had not acquired possession (h). In such a case the seller's possession continues, not because he has in fact complete and exclusive control (for he has it not), but because the common law does not recognise any partial transfer of possession, and does not allow possession to be vacant, and legal possession once acquired continues until it is completely changed, or the subject-matter ceases to exist. Constructive delivery. Apart from this rather outlying question, it is to be observed, and it is shown by the illustrations to this section, that a change in the possession of goods, and therefore delivery within the definition above, may take place without any change in their actual and visible custody. There is said to be a constructive delivery in such cases, and they may be classified as follows (i) : 1. A seller in possession of the thing sold assents to hold it solely on the buyer's account. There may be constructive delivery of this kind whether he continues to hold as a bailee for reward or as a gratuitous borrower (see Marvin v. Wallace, p. 376, above). The seller's assent must be proved ; it will not be presumed (&). But acts of the buyer treating himself as owner and the seller as his servant or bailee are relevant to prove delivery as against the buyer. Where A. ordered a certain quantity of goods (not yet specified) of B., and B. sent A. an invoice specifying particular goods as sold to A. " free for six months," i.e., to remain in B.'s warehouse without charge, credit being also given for six months, and at (/) Hilton v. Tucker (1888) 39 Ch. D. (/<) Milgnte v. KebUe (1841) 3 Man. & 669, 676. If C., holding for A. the key of Gr. 100, 60 R. R. 475. This case is cited a room containing A.'s goods, is told by A., in text-books as an authority on unpaid with B.'s consent, to hold it at B.'s tlis- vendor's lien, but really adds nothing to posal, this may well enough be called a the law on that head. The only question constructive delivery to B. ; but it is not was whether there had been a delivery, clear from the report exactly what the and it was so treated by the Court, facts were, or were thought by the Court (i~) Cp. Chalmers on Sale of Goods to be. Act, 118 ; Pollock and Wright on Pos- (g) If Hilton v. Tucker (last note) session, 46, 71 75. meant to decide the contrary, we think (It) Re Roberts (1887) 36 Ch. D. 196, it would not be law ; but there is no 200. necessity to read it so. CONSTRUCTIVE DELIVERY. 379 the end of the six months A. asked B. if he would take the goods back or S 90. sell them on A.'s account, this was held evidence of assent by A. to B. holding those goods for him as warehouseman (I). The fact that the buyer pays or agrees to pay warehouse rent for goods left in the seller's warehouse is not of itself sufficient to show that the seller holds as his bailee. The case is not the same where the first buyer sells to a sub- purchaser, and the first seller assents, by his direction, to hold the goods for the sub-purchaser : see Illustration (d). In the case on which that illustration is founded Lord Ellenborough, it is true, used language to the effect that acceptance of warehouse rent is of itself " a complete transfer of the goods " : " If I pay for a part of a warehouse so much of it is mine." These observations would be applicable if the buyer had actually rented part of the warehouse, and the goods bought by him were trans ferred to that part. If there is nothing but payment of warehouse rent, or agreement to pay it, the proposition is. too wide, and is disallowed by later authorities (m). The correct reason alone, as applicable to the case where there is a sale over to a new purchaser, is given by the illustration. The assent of B. that the goods shall be held for C. is assumed. It would perhaps have been better to state it more distinctly as one of the material facts ; for the case is really one of " agreement by attornment " (see the following paragraph). Lord Ellenborough's language, in fact, does not accord with commercial usage. Warehouse rent is not rent in the ordinary economic sense, and the owner making the payment so called is not entitled to have his goods stored in any particular part of the warehouse. He is no more a tenant than the railway passenger who leaves goods in a cloak-room. 2. The most frequent and important case is where a seller and buyer agree, with the assent of a third person in whose custody the goods are and who has been holding them for the seller, that he shall hold them on account of the buyer. Such an " agreement of attornment," as it is sometimes called, has the effect of transferring legal possession to the buyer. All three parties must concur; the mere handing of a delivery order or the like by the seller to the buyer is not enough (n) ; the seller's bailee must be instructed and assent to hold for the buyer. () Castle v. Suborder (1861) 6 H. & N. goods remained in the possession of the 828, Ex. Ch. vendor." It is not quite clear what, in (m) Miles v. Gorton (1834) 2 Cr. & M. the later case, the Judicial Committee 504, 39 K. R. 820, approved in Grice v. meant by saying that there was no Richardson (1877) 3 App. Ca. 319: "1 "actual delivery." See Blackburn on do not think that the payment of ware- Sale, 2nd ed. 341. house rent has the effect of a constructive (n) McEwan v. Smith (1849) 2 H. & C. delivery of the whole in a case where the 309 ; Farina v. Home (1846) 16 M. & W. 380 THE INDIAN CONTRACT ACT. Ss. 90, 91. 3. If the buyer is already holding the goods as the seller's bailee, and the seller agrees with him that he shall hold them as owner, the character of the possession is changed accordingly, and the buyer ceases to hold as bailee, and begins to hold as owner, as where an agent entrusted with goods for sale agrees to buy them himself (o). Acts relied on to prove such an agreement must, of course, be unambiguous. This case is not very common. The significance of this group of sections on delivery can be fully understood only in connection with the subsequent sections on seller's lien and stoppage in transit. It is not every case in which delivery is spoken of that illustrates the present section. Thus an auctioneer who sold a rick of hay standing, and showed an acknowledgment from the owner of his right to sell, was held not liable to an action at the suit of the buyer for not delivering the hay when the owner afterwards wrongfully revoked his authority and refused to give the buyer, on the auctioneer's order, access to the hayrick (p). The purchaser bought with knowledge of all the facts, and the auctioneer, who never had any possession at all either of the hay or of the place where it stood, could do no more for the purchaser than he did. But it is clear that the buyer did not acquire possession, though he did acquire property and an immediate right to possess the goods ; there was therefore no question of delivery within the meaning of the present section. Dealings with delivery orders and the like may have important effects on the title to goods under s. 108 (see that section and the commentary thereon). 91. A delivery to a wharfinger or carrier of the goods sold has the same effect as a delivery to the Effect of delivery to wharfinger or buyer, but does not render the buyer liable for the price of goods which do not reach him, unless the delivery is so made as to enable him to hold the 119, 73 R. R. 433. In the language of the the former owner actually became a English cases on the Statute of Frauds, bailee by attorning in advance to an taking and keeping a delivery order is unknown purchaser. This does not affect evidence of acceptance, but not of receipt. the practical result of the case. On Mr. (0) Edan v. Dudjield (1841) 1 Q. B. Benjamin's view the buyer was a bailor at 302, 55 R. R. 258. will, and might have had an action of (/>) Salter v. Woollams (1841) 2 Man. trespass ri et armis against a stranger. & G. 650, 58 R. R. 513. We must respect- I think not, but no such question arose, fully dissent from the opinion expressed in See now the editors' addition in 5th ed. Benjamin on Sale (4th ed. at p. 683) that 693. DELIVERY TO WHARFINGER OR CARRIER. 381 wharfinger or carrier responsible for the safe custody or S. 91. delivery of the goods. Illustration. B., at Agra, orders of A., who lives at Calcutta, three casks of oil to be sent to him by railway. A. takes three casks of oil directed to B. to the railway station, and leaves them there without conforming to the rules which must be complied with in order to render the railway ^company responsible for their safety. The goods do not reach B. There has not been a sufficient delivery to charge B. in a suit for the price. Delivery to wharfinger or carrier. In England it has been for more than a century " a proposition as well settled as any in the law that if a tradesman order goods to be sent by a carrier, though he does not name any carrier, the moment the goods are delivered to the carrier it operates as a delivery to the purchaser " (q). The qualifying part of the section embodies a decision not much later. There the seller had sent goods by carriers who notoriously professed not to answer for goods worth more than 51., unless specially entered and paid for. The seller omitted to make any special entry, and the goods never reached the buyer. It was held that the seller could. not recover the price from the buyer. It was the seller's duty " to do whatever was necessary to secure the responsibility of the carriers for the safe delivery of the goods, and to put them into such a course of conveyance as that in case of a loss the defendant might have his indemnity against the carriers " (r). In India the following requirements are established by general legislation : Under s. 3 of the Common Carriers Act III of 1865, no carrier is liable for loss of certain goods above Rs. 100 in value, unless the person delivering the goods shall have expressly declared the value and description thereof. Similarly, under ss. 72 and 73 of the Indian Railways Act IX of 1890, no railway company is liable to pay more than a specified value for the loss or destruction of certain animals, unless the person delivering the animals should have declared them to be of a higher value. Accordingly consignors neglecting to make the required declarations do so at the peril of losing their right to recover the price from the buyer if the goods miscarry. This section must of course be read with and subject to ss. 99, 100, as regards an unpaid vendor's right to stop the goods in transit. (/f) Dutton v. Solomonson (1803) 3 Bos. & P. 582, 7 R. R. 883. (r) Clarke v. Hutchim (1811) 14 East, 475, 13 R. R. 283. 382 THE INDIAN CONTRACT ACT. S. 92. 92. A delivery of part of goods, in progress of the Effect *of part delivery of the whole, has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole ; but a delivery of part of the goods, with an intention of severing it from the whole, does not operate as a delivery of the remainder. Illustrations. (a) A ship arrives in a harbour laden with a cargo consigned to A., the buyer of the cargo. The captain begins to discharge it, and delivers over part of the goods to A. in progress of the delivery of the whole. This is a delivery of the cargo to A. for the purpose of passing the property in the cargo. (b) A. sells to B. a stack of firewood, to be paid for by B. on delivery. After the sale, B. applies for and obtains from A. leave to take away some of the firewood. This has not the legal effect of delivery of the whole. \Bunney v. Pvyntz (1833) 4 B. & Ad. 568 ; 38 E. E. 309.] (c) A. sells 50 maunds of rice to B. The rice remains in A's warehouse. After the sale, B. sells to C. 10 maunds of the rice, and A., at B.'s desire, sends the 10 maunds to 0. This has not the legal effect of a delivery of the whole. [See next page.] [A. sells five bales of goods to B. to be paid for on delivery. B. receives and pays for one bale, and refuses to take the others as not being according to description. There has not been a delivery of the whole, and A. may be entitled to sue B. for not accepting the four bales, but cannot sue for their price : Mitchell, Reid & Co. v. Buldeo Doss (1887) 15 Cal. 1.] Part delivery. This affirms the common law rule that delivery of part may be a delivery of the whole if it is so intended and agreed, but not otherwise, and the burden of proof seems to be on the party affirming that such was the intention (). " It seems to me," said Brett, L.J., " that a delivery of part, or even of the bulk of a cargo, is not prinut facie a delivery of the whole, and that those who rely upon the part delivery as a construc- tive delivery of the whole are bound to show that the part delivery took place under such circumstances as to make it a constructive delivery of the whole " (t). " It is now held that the delivery of part operates as a con- structive delivery of the whole only where the delivery of part takes place (s) Lord Blackburn in Kemp v. Falk the like in parts, and an essential part (1882) 7 App. Ca. 573, 586. were delivered first, that might be such a (0 Ex parte Cooper (1879) 11 Ch. Div. circumstance : Ib. at p. 75. 68, 73. If the cargo were one machine or PART DELIVERY. 383 in the course of the delivery of the whole, and the taking possession by S. 92. the buyer of that part is the acceptance of constructive possession of the whole " (u), i.e. a recognition that the actual holder of the residue has begun to hold as a buyer's agent. " If part be delivered with intent to separate that part from the rest, it is not an inchoate delivery of the whole " ; still less can it be so if there is a refusal to deliver the whole (x). What was the intention in any particular transaction is a question of fact to be determined with regard to all the circumstances, and on which precedents can be only suggestive. The phrase " delivery of part of a cargo made in the progress of and with a view to the delivery of the whole " occurs in Lord Tenterden's judgment in Bunney v. Poyntz, on which Illustration (b) is founded. Illustration (c) is somewhat obscure to the modern reader until the case on which it was founded is consulted. It seems hopelessly unarguable that a subsale of part by B., the original buyer, to C., and delivery to C., at B.'s request, from A.'s warehouse, should operate as a constructive delivery of the remaining forty maunds from A. to B. , or in any way affect A.'s rights as unpaid vendor with respect to them. Such an argument was, however, put forward more than seventy years ago on similar facts (y} ; but even then the subsale and delivery under it were relied on rather " upon the ground that the vendee treated the goods as his own " (z), with the consent of the vendor, than because of any supposed intrinsic virtue of part delivery. The Court did not think it necessary to hear the defendant's counsel on either branch of the argument. Whichever way it was considered, the dealing with part could not be presumed to have any reference to the whole, nor could the seller be presumed to intend to abandon any right as to the residue. There was also a question of the effect of paying warehouse rent (see p. 379, above). It may, perhaps, be worth while to observe that a decision under the Statute of Frauds in England that an acceptance of part of goods ordered, where the contract included several classes of goods, made the contract enforceable as to all the goods contracted for, and not only as to the class to which the parcel accepted belonged (a), has. nothing to do with the effect of part delivery as regards the seller's lien or right to stop in transit either at common law or under the present Act in India. It certainly does not decide that the fact of a cargo sold at one time containing goods of several (M) Willes, J., Bolton v. L. $ Y. R. Co. 504, 39 R. R. 820. (1866) L. R. 1 C. P., p. 440. (?) Follett argutndo, 2 Cr. & M. 507, (a;) Dixon v. Yates (1833) 5 B. & Ad. 39 R. R. 823. 313, 339, 341, 39 R. R. 489, 497, 499. (a) Elliott v. Thomas (1838) 3 M. & W. (*/) Miles v. Goi-ton (1834) 2 Cr. & M. 170, 49 R. R. 558. 884 THE INDIAN CONTRACT ACT. Ss. 92 94. kinds might not strengthen the presumption against a delivery of part of the cargo, consisting of goods of one kind only, being intended to operate as a delivery of the whole. seller not bound 93. In the absence of any special buyetrppllesL promise, the seller of goods is not bound delivery. j. Q d e ij ver them until the buyer applies for delivery. Buyer's duty to apply for delivery. There is really no distinct authority on this point in English law. The framers of the Sale of Goods Act assumed the rule to be " that it was for the buyer to take delivery, and that, in the absence of any different agreement, the duty of the seller to deliver was satisfied by his affording to the buyer reasonable facilities for taking possession of the goods at the agreed place of delivery " (6). A buyer of goods made an assignment of the benefit of his contract which was found to be fictitious ; he afterwards took a reassignment and sued on the contract. He was held not entitled to adopt a demand for delivery, which the nominal assignee had made in the meantime, as a demand made on the buyer's account, as required by this section (c). 94. In the absence of any special promise as to delivery, goods sold are to be delivered at the Place of delivery. . . place at which they are at the time or the sale ; and goods contracted to be sold are to be delivered at the place at which they are at the time of the contract for sale, or if not then in existence, at the place at which they are produced. Place of delivery. There was no definite English authority on this point before the Sale of Goods Act, s. 29, which has enacted that, if there is no special agreement, "the place of delivery is the seller's place of business, if he have one, and if not, his residence," unless the contract is for specific goods which to the knowledge of the parties are at some other place. This appears to be an improvement. The present section correctly represents what was understood to be the law, and is current in English and American books of repute. A contract for the sale of goods "to be delivered at any place in Bengal ... to be mentioned hereafter " does not fall within the operative (&) Chalmers, Sale of Goods Act, 67, (c) Mulji v. Nathuthal (1890) 15 68. Bom. 1. SELLER'S LIEN. 385 part of this section, for there is a special promise as to delivery, giving the Ss. 94, 95. buyer the right to fix the place anywhere in Bengal, and the words " to be mentioned hereafter " express only what the law would have implied, that the seller is entitled to reasonable notice of the buyer's choice. The case rather resembles that which is contemplated in s. 49. There was, in fact, no question under that section, as the buyers had demanded delivery at the Hovvrah railway station, and the sellers had refused it (d). Distinction between contract of sale of goods and contract to deliver goods in payment of debt. A contract of sale differs from a contract to pay an existing debt in specific articles (which is strictly not payment, but accord and satisfaction). In the latter case, where no place of delivery is specially appointed, or is to be inferred from usage of trade or the nature of the thing, it is the duty of the debtor first to request the creditor to appoint a place, whereupon the creditor must appoint a place which is reasonable ; if he does not, the debtor himself may name a reasonable place, giving notice to his creditor, and a tender of the property at that place will be good. So also where the time of delivery is fixed, although the place is not, the same rule applies (e). Seller's Lien. 95. Unless a contrary intention appears by the con- tract, a seller has a lien on sold goods as long Seller's lien. . as they remain in his possession and the price or any part of it remains unpaid. Seller's lien. This and the next group of sections deal with the rights of an unpaid seller first to hold the goods as security for the price before he has parted with possession, secondly to stop the goods as against an insolvent buyer while the goods, having left the seller's possession, are not yet in the buyer's. The first of these rights is called, though inadequately, lien ; the second is the right to stop in transit. The Contract Act has wisely substituted an English form for the Latin in transiiu, which is still current in English books, and is retained in the Sale of Goods Act. Considerable analogy will be found between these rights, and, in fact, they arc often confused or insufficiently distinguished in the earlier reported cases ; but there are also material distinctions to be observed. For the general principles of the subject there is still no better (d) Grenon v. Lachmi Narain (1896) Salleman (1868) 5 B, H. C. A. C. 126, 24 Cal. 8 ; L. R. 23 Ind. Ap. 119. 128. (e) Per Couch, C.J., in Dadabhai v. i.e. - 25 386 THE INDIAN CONTRACT ACT. S. 95. introductory statement than the following classical passage from a judg- ment of Bayley, J., delivered in 1825 (/) : "Where goods are sold, and nothing is said as to the time of the delivery, or the time of payment, and everything the seller has to do with them is complete, the property vests in the buyer so as to subject him to the risk of any accident which may happen to the goods, and the seller is liable to deliver them whenever they are demanded upon payment of the price ; but the buyer has no right to have possession of the goods till he pays the price. The seller's right in respect of the price is not a mere lien which he will forfeit if he parts with the possession, but grows out of his original ownership and dominion, and payment of or tender of the price is a condition precedent on the buyer's part; and until he makes such payment or tender he has no right to the possession. If goods are sold upon credit, and nothing is agreed upon as to the time of delivering the goods, the vendee is immediately entitled to the possession, and the right of possession and the right of property vest at once in him ; but his right of possession is not absolute ; it is liable to be defeated if he becomes in- solvent before he obtains possession" : Tooke v. Hollingivorth(g). An unpaid seller's lien depends on actual possession and not on title, and is not affected by his having parted with a document capable of trans- ferring title. He may have given a bill of lading which passes the legal property in the goods, or he may have given a delivery order which, though it does not pass the legal title or property in the goods, enables the person receiving it to acquire possession of the goods and acquire a title in that way, but whatever he has done in that respect does not destroy his right of lien as long as he keeps possession of the goods as vendor, and in no other character (A). Accordingly it has been held in India that a delivery order is a mere token of authority to deliver, and does not enable the purchaser to confer a title upon a vendee or sub- vendee free from the vendor's lien for the price (i). A. seller is unpaid not only if the whole or part of the price has not been in any way paid or tendered, but if he has taken bills of exchange or other negotiable instruments as conditional payment, and the buyer has failed to meet them at maturity. And where payment by acceptance (/) Bloxam v. Sanders, 4 B. & C. p. 948, 28 R. R. 525. (g) (1793) 5 T. R. 215, 2 R. R. 573. It is not thought useful to give any specific account of this case, in which the facts were somewhat complicated. In Benjamin on Sale it is merely referred to in notes. Lord Blackburn did not cite it at all ; his editor, Mr. Graham, mentions it in a supplemental chapter of his own for a quite different purpose. (h) Imperial Bank v. London and St. Katharine Docks Co. (1877) 5 Ch. Div. 195, 200, per Jessel, M.R. (j) Le Geyt v. Harvey (1884) 8 Bom. 501. SELLER'S LIEN. 387 of bills or the like is stipulated for, it is presumed to be conditional on Ss. 95, 96 the bills being duly met. The English law on this point was thus stated i by Hellish, L. J. : " No doubt if the buyer does not become insolvent then credit is given by taking the bill, and during the time that the bill is current there is no vendor's lien, and the vendor is bound to deliver. But if the bill is dishonoured before delivery has been made, then the vendor's lien revives" (&). Compare s. 99 (p. 391, below) on stoppage on transit, and the authorities there cited. 96. Where, by the contract, the payment is to be made at a future clay, but no time is fixed for the Lien where pay- _ ment to be made at delivery of the goods, the seller has no lien, a future day, but no .time fixed for and the buyer is entitled to a present delivery del i vcrv of the goods without payment. But if the buyer becomes insolvent before delivery of the goods, or if the time appointed for payment arrives before the delivery of the goods, the seller may retain the goods for the price. Explanation. A person is insolvent who has ceased to " insolvency " P a J h* 8 debts in the usual course of business, or who is incapable of paying them. Illustration. A. sells to B. a quantity of sugar in A.'s warehouse. It is agreed that three months' credit shall be given. B. allows the sugar to remain in A.'s warehouse. Before the expiry of the three months B. becomes insolvent. A. may retain the goods for the price. Seller's lien where the sale is on credit. "Where the owner of goods sells on credit, the buyer has a right to immediate possession ; but if he suffer the goods to remain until the period of payment has elapsed, and no payment in fact is made, then the seller has a right to retain them. There is no difference in principle whether the seller charges the buyer with a rent or not. They are still in his possession " (I). This holds whether the buyer is actually insolvent or not (m). (It) Ounn v. Holckow, Vatighan fy Co. Sale of Goods Act, p. 82, note 2, following (1875) L. R. 10 Ch. 491, 501, where the Blackburn on Sale, p. 324, and Benjamin, principal rule is declared as settled law. 5th ed. 827 : a strange mistake to have (Z) Judgment of Bay ley, J., in New v been made and repeated by three very Swain (1828) Danson and Lloyd, 193 (this accurate writers in succession, is a rare volume of mercantile cases, con- (m) The error mentioned in the last taining gome not reported elsewhere), 34 note led Lord Blackburn to think this R. R. 767. This was not a Nisi Prius point unsettled, decision, as stated in Chalmers on the 252 388 THE INDIAN CONTRACT ACT. S. 96. It will be observed that the buyer's insolvency puts an end to his right to claim delivery even where the sale is on credit and the term of credit has not yet expired. (See the English authorities cited on s. 95, p. 386, above.) A sale is on credit when the seller agrees to accept payment at a future date, and there is nothing to show that the buyer is not entitled to immediate delivery. " It is ... undoubted law that by a sale of specific goods for an agreed price the property passes to the buyer and remains at his risk, . . . and it is equally clear law that where by the contract the payment is to be made at a future day, the lien for the price which the vendor would otherwise have is waived, and the purchaser is entitled to a present delivery of the goods without payment, upon the ground that the lien would be inconsistent with the stipulation in the contract for a future day of payment." Accordingly, where specific goods were sold "to be paid for by cash in one month less 5 per cent, discount," this was held to be a sale on a month's credit, and not a sale for ready money with a month's grace (.). In the same case evidence of a custom in the particular trade that the sellers were not bound to deliver without payment was rejected as contrary to the terms of the contract; but on this point the decision was afterwards overruled (o). The text of the Act throws no light on the position in this respect of a seller who has assented to hold the goods as bailee for the buyer (see on s. 90, pp. 379, 380, above). It may be logically argued that by ceasing to possess in his original character, and agreeing to possess on the buyer's account, he has abandoned his lien ; and this reason was allowed by English authorities before 1893 when the buyer was merely in default (p) ; but if the buyer was insolvent the right of lien was held to revive (q). A striking instance of the operation of this last rule will be found in a case that came before the Judicial Committee of the Privy Council. The appellants, who traded in Australia, imported three parcels of tea which they sold to the respondents, who gave their acceptances or promissory notes for the price. The appellants were also warehousemen having a bonded warehouse, in which they had stored the tea on its importation. On selling the tea to the respondents the appellants handed () Spartall v. Benecke (1850) 10 C. B, 58, 43 R. R. 300, where it is treated as 212, 84 R. R. 532. already clear that " a vendor who is him- (t>) Field v. Lelean (1861) in Ex. Ch., self the warehouseman " does not lose his 6 H. & N. 617. rights against a buyer who afterwards (/>) Cusack v. Robinson (1861) 1 B. & S. becomes bankrupt merely by giving him 299, judgment of Court delivered by a delivery order ; Grice v. Richardson Blackburn, J. (1877) 3 App. Ca. 319. ( and the bll y er all WS the at a fru n reday e rnd de g ods to remain in the possession of the seller buyer allows goods ^fl that M) Jenkyns v. Usborm (1844) 7 Man. make the relation of the parties equiva- & G. 678, 66 R. R. 767, judgment of lent to that of buyer and seller for other Court of C. P. per Tindal, C.J. purposes : Cassalfoglou v. Gibbs (1883) 11 (n) The Sale of Goods Act, p. 79. Q. B. Div. 797, 806, per Fry, L.J. 00 Few v. Wray (1802) 3 East, 93, 394 THE INDIAN CONTRACT ACT. Ss. 99, 100. In the case of a surety for the buyer who has paid the seller his right to stand in the seller's place appears to be included in " all the rights which the creditor had against the principal debtor," to which he is expressly entitled under s. 140 (p. 469, below). The corresponding rule is now settled in England (p). 100. Goods are to be deemed in transit while they are in the possession of the carrier, or lodged at When goods are to be deemed in any place in the course of transmission to the transit. buyer, and are not yet come into the posses- sion of the buyer or any person on his behalf, otherwise than as being in possession of the carrier, or as being so lodged. Illustrations. (a) B., living at Madras, orders goods of A. at Patna, and directs that they shall be sent to Madras. The goods are sent to Calcutta, and there delivered to C., a wharfinger, to be forwarded to Madras. The goods, while they are in the possession of C., are in transit. (b) B., at Delhi, orders goods of A. at Calcutta. A. consigns and forwards the goods to B. at Delhi. On arrival there, they are taken to the warehouse of B. and left there. B. refuses to receive them, and immediately afterwards stops payment. The goods are in transit. [James v. Griffin (1836) 1 M. & W. 20, 46 E, E. 243; Bolton v. L. & Y. R. Co. (1866) L. E. 1 C. P. 431.] (c) B., who lives at Puna, orders goods of A. at Bombay. A. sends them to Puna by C., a carrier appointed by B. The goods arrive at Puna, and are placed by C., at B.'s request, in C.'s warehouse for B. The goods are no longer in trail sit. [Settled law : Wh iteJtead v. A nderson (1842) 9 M. & W. 518, 60 E. E. 819 ; and see Parke B.'s judgment in James v. Griffin, cited below.] (d) B., a merchant of London, orders 100 bales of cotton of A., a merchant at Bombay. B. sends his own ship to Bombay for the cotton. The transit is at an end when the cotton is delivered on board the ship. [And it makes no difference that B.'s ship is employed by him as a general ship : Schotsmans v. L. & Y. R. Co. (1867) L. E. 2 Ch. 332.] (e) B., a merchant of London, orders 100 bales of cotton of A., a merchant at Bombay. B. sends his own ship to Bombay for the cotton. A. delivers the cotton on board the ship, and takes bills of lading from the master, making the cotton deliverable to A.'s order or assigns. The cotton arrives at London, but, before coming into B.'s (/>) Imperial Hunk v. London and St. Katharine, Docks Co, (1877) 5 Ch. D. 195. DURATION OP TRANSIT. 395 possession, B. becomes insolvent. The cotton has not been paid for. S. 100. A. may stop the cotton. [In this case there is, unless a contrary intention distinctly appears, only a conditional appropriation of the goods to the contract. See the authorities cited under s. 83, p. 361, above. The master of B.'s ship, therefore, holds the goods only as a carrier, and not as B.'s agent. Where the condition to be fulfilled by the buyer is accepting a bill drawn against the goods, his acceptance while the goods are in transit makes him the owner of the goods, but does not make the carrier hold as his agent or servant. See Calm v. Pocketfs Bristol, etc., Co. [1899] 1 Q. B. 643, 0. A., where the discussion of principles is instructive. The actual decision was on a point of some difficulty under s. 25 of the Sale of Goods Act] English authorities. The principle here laid down is very well settled in English law, and it will suffice here to quote a few of the most authoritative expositions in order of date : 1836, Baron Parke, James v. Griffin, 2 M. & W. at p. 632 ; 46 R. R. at p. 253 : " The delivery by the vendor of goods sold to a carrier of any description, either expressly or by implication named by the vendee, and who is to carry on his account, is a constructive delivery to the vendee ; but the vendor has a right if unpaid, and if the vendee be insolvent, to retake the goods before they are actually delivered to the vendee, or some one whom he means to be his agent to take possession of and keep the goods for him, and thereby to replace the vendor in the same situation as if he had not parted with the actual possession. . . . The actual delivery to the vendee or his agent, which puts an end to the transitus or state of passage, may be at the vendee's own warehouse, or at a place which he uses as his own, though belonging to another, for the deposit of goods : Scott v. Pettit (q\ Roive v. Pickford (r) ; or at a place where he means the goods to remain until a fresh destination is communicated to them by ordei-s from himself : Dixon v. Baldivin (s) ; or it may be by the vendee's taking possession by himself or agent at some point short of the original intended place of destination." 1842, Court of Exchequer, judgment by Parke, B., Whitehead v. Anderson, 9 M. & W. at p. 534 ; 60 R. R. at p. 833 : " The law is clearly settled that the unpaid vendor has a right to retake the goods before they have arrived at the destination originally contemplated by the purchaser, unless in the meantime they have come to the actual or constructive possession of the vendee. If the vendee take them out of the possession (?) (1803) 3 B. & P. 469, 7 R. R. 804. It is not thought necessary to give a (>) (1817) 8 Taunt. 83, 19 R. K. 466. specific account of any of these cases, (.v) (1804) 5 East, 175. 7 R. R. 681. THE INDIAN CONTRACT ACT. S. 100. of the carrier into his own before their arrival, with or without the consent of the carrier, there seems to be no doubt that the transit would be at an end. . . . This is a case of actual possession, which certainly did not occur in the present instance (). A case of constructive possession is where the carrier enters expressly or by implication into a new agreement, distinct from the original contract for carriage, to hold the goods for the consignee or his agent, not for the purpose of expediting them to the place of original destination pursuant to that contract, but in a new character, for the purpose of custody on his account, and subject to some new or further order to be given to him." 1867, Lord Chelmsford, L.C., Schotsmans v. Lanes. & Yorks. JR. Co., L. R. 2 Ch. at pp. 335, 336 : " If the goods are actually delivered to an agent of the vendee employed by him to receive delivery, the vendor is divested of his right of stoppage in transitu. On the other hand, although there is an actual delivery to the vendee's agent, the vendor may annex terms to such delivery, and so prevent it from being absolute and irrevocable. ... If the vendor desires to protect himself, he may . . . preserve his right of stoppage in transitu by taking bills of lading, making the goods deliverable to his order or assigns." Cairns, L.J., ib. at p. 338 : " The essential feature of a stoppage in transitu ... is that the goods should be at the time in the possession of a middleman, or of some person intervening between the vendor who has parted with and the purchaser who has not yet received them." 1879, James, L.J., Ex parte Cooper, 11 Ch. D. at pp. 77, 78 (after the several members of the Court had given judgment on the special facts): " I think that our decision, in which we are unanimous, may be expressed thus : When goods are placed in the possession of a carrier, to be carried for the vendor, to be delivered to the purchaser, the transitus is not at an end so long as the carrier continues to hold the goods as a carrier. It is not at an end until the carrier, by agreement between himself and the consignee, undertakes to hold the goods for the consignee, not as carrier, but as his agent. Of course, the same principle will apply to a warehouse- man or a wharfinger." 1879, James, L.J., Ex parte Rosevear China Clay Co., 11 Ch. D. at p. 568: " The authorities show that the vendor has a right to stop in transitu until the goods have actually got home into the hands of the purchaser, or of some one who receives them in the character of his servant or agent. . . . (0 The assignees of the bankrupt buyer his lien for the freight, and afterwards had made an unsuccessful attempt to received a notice of the stoppage in transit obtain actual possession by seeing and from the seller and delivered to the seller's touching some of the cargo on board- agent. The captain ef used to deliver or to waive DURATION OF TRANSIT. 397 The principle is this : that when the vendor knows that he is delivering S. 100. the goods to some one as carrier, who is receiving them in that character, he delivers them with the implied right, which has been established by the law, of stopping them so long as they remain in the possession of the carrier as carrier." Cotton, L.J., ib. at pp. 571, 572: " I think it is clearly established that so long as goods are in the hands of a carrier as carrier they are not in the actual possession of the purchaser, whoever may have nominated the carrier. The contract with a carrier to carry goods does not make the carrier the agent or servant of the person who contracts with him, whether he be the vendor or the purchaser of the goods. . . . Here the contract was that the goods were to be placed on board (u] by the vendors, not by the purchaser. The purchaser was to indicate where the goods were to go, and only when they reached that destination would they come into his actual possession." 1887, Cave, J., Bethell v. Clark, 19 Q. B. D. at p. 561 (goods sent by seller to ship named by buyer ; no bill of lading ; buyer had receipt from ship's mate ; did nothing with it : Held, that the goods were in transit during the voyage) : "In all cases of stoppage in transitu, it is necessary first of all to ascertain what is the transitus or passage of the goods from the possession of the vendor to that of the purchaser. The moment the goods are delivered by the vendor to a carrier to be carried to the pur- chaser the transitus begins. When the goods have arrived at their destination and have been delivered to the purchaser or his agent, or when the carrier holds them as warehouseman for the purchaser, and no longer as carrier only, the transitus is at an end. The destination may be fixed by the contract of sale, or by directions given by the purchaser to the vendor. But, however fixed, the goods have arrived at their destination, and the transitus is at an end, when they have got into the hands of some one who holds them for the purchaser and for some other purpose than that of merely carrying them to the destination fixed by the contract or by the directions given by the purchaser to the vendor. The difficulty in each case lies in applying these principles." 1888, Lord Esher, M.R. (same case on appeal), 20 Q. B. D. at p. 617 : " When the goods have not been delivered to the purchaser or to any agent of his to hold for him otherwise than as a carrier, but are still in the hands of the carrier as such and for the purpose of the transit, then, although such carrier was the purchaser's agent to accept delivery so as to pass the property, nevertheless the goods are in transitu and may be stopped. (M) The ship was chartered by the purchaser, but there was no contract to deliver on board any particular ship. 398 THE INDIAN CONTRACT ACT. S. 100. There has been a difficulty in some cases where the question was whether the original transit was at an end, and a fresh transit had begun. The way in which that question has been dealt with is this : Where the transit is a transit which has been caused either by the terms of the contract or by the directions of the purchaser to the vendor, the right of stoppage in transitu exists ; but if the goods are not in the hands of the carrier by reason either of the terms of the contract or of the directions of the pur- chaser to the vendor, but are in transitu afterwards in consequence of fresh directions given by the purchaser for a new transit, then such a transit is no part of the original transit, and the right to stop is gone. So also if the purchaser gives orders that the goods shall be sent to a particular place, there to be kept till he gives fresh orders as to their destination to a new carrier, the original transit is at an end when they have reached that place, and any further transit is a fresh and independent transit." 1890, Lord Herschell, delivering the judgment of the Judicial Committee, Lyons v. Hoffnung, 15 App. Ca. at pp. 396, 397 (buyer at Sydney instructed sellers' agent to send the goods when packed and marked to a named wharf in Sydney. He said the goods were going with him. Keceipts were given by the shipowners describing Hoffnung &, Co., the sellers, as the shippers, Clare, the buyer, as the consignee, and Kimberley (x) as the place of destination. Clare became insolvent after the goods left Sydney and before they arrived at Kimberley, and Hoffnung & Co. stopped the goods. It did not appear whether Clare did or did not in fact sail in the same ship, but their Lordships clearly held it not material) : " The goods at the time of the purchase were undoubtedly intended by the purchaser to pass direct from the possession of the vendors into the possession of a carrier to be carried to a destination intimated by the purchaser to the vendors at the time of the sale, because, although the language used by Clare according to his evidence was that he was going to Kimberley and going to take these goods with him, that language must be interpreted according to the ordinary course of business as it would be understood by business men ; and it is obvious that Clare was not going to take these goods with him in any other sense than that he intended himself to be a passenger by the vessel on which they were to be shipped and by which they were to be carried, his intention being that the goods should be shipped on board that vessel as cargo in the ordinary way, carried by carriers to their destination, and there delivered to him. " These circumstances appear to their Lordships sufficient to indicate that the right to stop in transitu, existed. . . . The law appears to their (x) Presumably Kimberley in Western Australia. DURATION OF TRANSIT. 399 Lordships to be very accurately and clearly laid down by the Master of S. 100. the Kolls in the case of Bethell v. Clark." (See p. 397, above.) The result of the English authorities as to the persistence or determination of the transit in several classes of cases is summed up by s. 45 of the Sale of Goods Act, 1893, which see in Appendix. It must be observed that it is really a question of fact, depending on the intention of the parties, whether dealings with goods at this or that point, say at a port of embarkation after a railway journey, are the end of a first transit to be followed by a new one, or only an incident in one continuous transit. The fact that directions for forwarding are given by the buyer may coexist with a contract leaving him no option as to the ultimate destination, and therefore with a continuing transit (y) ; on the other hand, delivery to a commission agent for the ultimate buyer, such an agent being 'himself the buyer as regards the original seller, may show that the transit is at an end (z). Indian authorities. Indian authorities have closely followed on the lines marked out by the English Courts. In G. I. P. Ry. Co. v. Hanmandas (a) goods were delivered by the vendor to a railway company for conveyance to their place of destination ; it was held that the transit determined on payment of freight to the company by an indorsee of the railway receipt for the goods from the purchaser, and on his loading the goods in his carts, and that the company had no right to stop the goods on behalf of the unpaid vendor on notice from him of the buyer's insolvency, merely because the carts had not then left the goods compound of the railway station. Any tortious act of the carrier after the goods are "at home," such as delivery to a person purporting to claim under the unpaid seller's authority, but not having authority in fact, cannot defeat the purchaser's right (6). Nor, on the other hand, does a mistaken or otherwise wrongful delivery of goods by the carrier after notice to stop in transit defeat the right of the unpaid vendor (c). (;/) Exparte Watson (1877) 5 Ch. Div. (V) Bird v. Brown (1850) 4 Ex. 786, 35. cited in Lilladhar v. George Wreford 0) Exparte Miles (1885) 15 Q. B.Div. (1892) 17 Bom. 62, 88. Authority cannot 39. The remark of Brett, M.H., ad fin. be conferred by ratification unless the at p. 47, is instructive (leave had been principal could have effectually autho- asked to appeal to the House of Lords) : rised the act when done. See on s. 196, " If there was a question of law, we might p. 537, below. consider it, but it is only a question of (c) Lift v. Cowley (1816) 7 Taunt. 169, fact.'' 17 E. R. 482, cited in Lilladhar v. George () (1889) 14 Bom. 57. The facts of Wreford (1892) 17 Bom. 62, 89, where this case are much like those of EJC parte the plaintiff's name is misprinted Sett. Gibbcs (1875) 1 Ch. D. 101. 400 THE INDIAN CONTRACT ACT. Ss. Public Wharves. The effect of landing goods at wharves belonging to 100, 101. pxiblic bodies like the " Trustees of the Port of Bombay," constituted by Bombay Act VI of 1879, was considered by Farran, J., in Lilladhar v. George Wreford (d), where the learned Judge, after citing Barber v. Meyerstein (e) and Glyn, Mills & Co. v. East and West India Dock Co. (f), proceeded to say : " From this it would seem to follow that, so long as they [the goods] are subject to a lien for freight, the transit has not ended. The goods are not at home. The converse proposition would, however, seem also to be true that when the shipowner lands the goods under the statute, and his freight has been paid, his right of control and lien over the goods is gone, and thenceforth the goods are held by the statutable wharfingers for the consignee alone." 101. -The seller's right of stoppage does not, except in Continuance of the cases hereinafter mentioned, cease on the right of stoppage. b U y er s reselling the goods while in transit, and receiving the price, bat continues until the goods have been delivered to the second buyer, or to some person on his behalf. This rule has been settled for more than seventy years (see the well- known case of Dixon v. Tates, decided in 1833) (g). As Lord Blackburn says, a purchaser who has acquired ownership " may sell the goods subject to the first vendor's rights, and if he does so the property is transferred to the second purchaser, by the second bargain and sale, without any delivery of possession. But though the second purchaser acquires by his bargain and sale the legal property in the goods, and every right which his immediate bargainer had in the goods, yet (if there be not an assignment of a bill of lading) [or other document showing title to the goods ; see s. 102, below] he acquires no greater right ; he takes the property subject to the same restrictions that his immediate vendor held it under" (A). The existence of this rule shows that, whatever the right to stop in transitu may once have been, it has not been in modern times a merely equitable right ; for all equitable rights, being in their essence personal, are liable to be defeated by a purchaser of the legal estate or interest for value and without notice. Under the next section we have the important exception from this (d) (1892) 17 Bom. 62, 91, 92. was a case of vendor's lien, but theprinci- (e) (1870) L. E. 4 H. L. 317. pies are throughout treated as identical. (/) (1882) 7 App. Ca. 591. (A) Blackburn OH Pstfe, 2nd ed, p. 386. ft) 5 B,& Ad. 313, 39 R. R, 489. This RESALE OF GOODS IN TRANSIT. 401 rule where a bill of lading or other document of title has been assigned for Ss. value. Nothing short of this will prevent the application of the ordinary 101 > 1 '^ 2 - rule ; for example, the existence of a bill of lading made out in the sub- purchaser's name, but not delivered to him, is not sufficient (i). Neither is any kind of agreement with a sub-purchaser, even with payment, unaccompanied by an indorsement of the bill of lading (). 102. The right of stoppage ceases if the buyer, having cessation of right obtained a bill of lading or other document buy^ffTiiTo^ snowin g title to tn e goods, assigns it, while lading. fo e g 00( j s ar e in transit, to a second buyer, who- is acting in good faith, and who gives valuable con- sideration for them. Illustrations. (a) A. sells and consigns certain goods to B., and sends him the bill of lading. A. being still unpaid, B. becomes insolvent, and, while the goods are in transit, assigns the bill of lading 'for cash to 0., who is not aware of his insolvency. A. cannot stop the goods in transit. (b) A. sells and consigns certain goods to B., A. being still unpaid. B. becomes insolvent, and, while the goods are still in transit, assigns the bill of lading for cash to 0., who knows that B.is insolvent. The assignment not being in good faith, A. may still stop the goods in transit. Rule of English law. The common law rule has long been well settled. It has been said by a great Judge to make bills of lading negotiable in a limited sense " as against stoppage in transitu only "(7)>^TJhe extension of the same effect to other documents of title is due to the Indian Legislative Department ; it does not appear in the Law Commissioners' original draft. The present section would appear, in terms, to include the case of assignment to a se'cond buyer where the sale is on credit, and the term of credit has not expired ; for a solvent buyer's promise is certainly a valuable consideration, and insolvency is not to be presumed. It is the better opinion in England that in such a case the right to stop in transit is defeated, and the original seller has not any substituted (i) Ex parte Golding, Davis $ Co. at p. 582. (1880) 13 Ch. Div. 628. (I) Willes, J., in Futntes v. Montis (ft) Kemp v. Falk (1882) 7 App. Ca. (1868) L. B. 3 C. P. at p. 276 573 ; sec especially per Lord Blackburn i.e. 26 402 THE INDIAN CONTRACT ACT. Ss. equitable right against the purchase-money, but there is no positive 102, 103. decision (i). Bills of Lading Act. The following two sections of the Bills of Lading Act IX of 1865 may be noted in this connection : "1. Every consignee of goods named in a bill of lading, and every indorsee of a bill of lading to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment or indorse- ment, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract con- tained in the bill of lading had been made with himself. " 2. Nothing herein contained shall prejudice or affect any right of stoppage in transitu, or any right to claim freight against the original shipper or owner, or any liability of the consignee or indorsee by reason or in consequence of his being such consignee or indorsee, or of his receipt of the goods by reason or in consequence of such consignment or indorse- ment." 103. Where a bill of lading or other instrument of stoppage where title to an 7 g oods is assigned by the buyer of piedgeSecure SUctl g ds ty Wa J f P led g e > to SGCUTe an specific advance, advance made specifically upon it, in good faith, the seller cannot, except on payment or tender to the pledgee of the advance so made, stop the goods in transit. Illustrations. (a) A. sells and consigns goods to B. of the value of 12,000 rupees. B. assigns the bill of lading for these goods to C. to secure a specific advance of 5,000 rupees made to him upon the hill of lading by C. B. becomes insolvent, being indebted to C. to the amount of 9,000 rupees. A. is not entitled to stop the goods except on payment or tender to C. of 5,000 rupees. (b) A. sells and consigns goods to B. of the value of 12,000 rupees. B. assigns the bill of lading for these goods to C. to secure the sum of (OT) Lord Selborne in Kemp v. Folk the goods themselves, the contract with (1882) 7 App. Ca. 573, 577; and see the sub-purchaser having been carried out Chalmers on Sale of Goods Act, 87. Ex by consent. But such a doctrine is more parte Golding, Davis % Co., (1880) 13 or less involved in the language of the Ch. Div. 628, does not decide the con- judgments. The point is fully discussed travy, for there the sub-purchaser never by the learned editors of Benjamin on got the bill of lading, and the seller's Sale, 5th ed. 921. The view more shortly right to come upon the purchase-money expressed here is identical with theirs, was in substitution for the right to stop EFFECT OF PLEDGE OF BILL OF LADING. 403 5,000 rupees due from him to C. upon a general balance of account. S. 103. B. becomes insolvent. A. is entitled to stop the goods in transit without payment or tender to 0. of the 5,000 rupees. English authorities. Both the illustrations to this section are suggested by the English case of Spalding v. Rinding (n). The first is covered by the decision there, and by other authorities, and is settled law in England ; but what corresponds to the second in Spalding v. Ruding is a much more guarded proposition, namely, that the assignee of the bill of lading for a definite advance cannot, because he happens to be the insolvent buyer's factor, also claim to be satisfied for his general balance of account in priority to the seller's claim to stop in transitu. There is no such rule in English authori- ties as that a transfer of a bill of lading expressly to secure a balance of account, or any other existing debt, will not prevail over the right to stop in transit. Apparently the terms of the present section interpret Spalding v. Ruding in the light of the opinion of the Judicial Committee, in 1869, that a bill of lading given to secure an antecedent debt was not effectual against the unpaid seller (o) ; but the Court of Appeal in England has since held the contrary (p), not finding any principle or authority to support the novel distinction, as they considered it, introduced by the Judicial Committee. The words of the Act, however, are clear and consistent with the authori- ties as they stood when it was passed. Nothing short of a complete novation, it would seem, will exclude the unpaid seller's right in such a case. Where the pledgee has other security besides the goods comprised in the bill of lading, the unpaid seller can call on him to resort to that security in relief of the goods in question or the purchase-money representing them (q). The best judicial exposition of the general principle is in a judgment () (1843) 6 Beav. 376, 63 E. E. 120. held sufficient by the Judicial Committee (o) Rodger v. Comptoir d'Escompte de itself in Chartered Bank of India, etc., v- Paris, L. E. 2 P. C. 393 (Lord Chelmsford, Henderson (1874) L. E. 5 P. C. 501, dis- Sir James Colvile, Sir Joseph Napier). tinguishing the former case on the ground (p) Leask v. Scott (1877) 2 Q. B. Div. that there was no specific pledge of the 376 (Lord Coleridge, C.J. Bramwell bill of lading in question, but a general and Brett, L.JJ.). This was clearly the demand of all the security the debtor stronger Court of the two on a question of could give. But it seems that under the mercantile law. The Sale of Goods Act Indian Act this last case would have to merely requires that the transferee should be decided the other way. These two take " in good faith and for valuable con- decisions of the Judicial Committee were sideration." The real consideration, as on appeals from Hong Kong arising out pointed out in Leask v. Scott, is present of the failure of the same firm, forbearance on the creditor's part ; and (#) Re Westzinthus (1833) 5 B. & Ad. forbearance coupled with a release was 817, 39 E. E. 665. 262 404 THE INDIAN CONTRACT ACT. S. 103. of Lord Blackburn's, which, for the present purpose, gives a sufficient view of the facts he was dealing with : " It appears that Mr. Falk, of Liver- pool, had sold to Mr. Kiell a quantity of salt, which was shipped on board a vessel bound for Calcutta ; that Mr. Kiell accepted a draft drawn against that cargo ; that bills of lading were made out, which were signed, not, as is usual, by the master, but by the shipowner himself; and that Mr. Kiell got those bills of lading. Now, so far as that goes, standing there, nothing can be more thoroughly established than the law upon it. Mr. Falk, having delivered the goods and taken a bill of exchange, had no right whatever to meddle with those goods further, unless before the end of the transitus (I shall say a word presently as to what comes at the end of the transitus) Kiell, the purchaser, became insolvent and stopped payment, and then if Falk had stopped the goods in transitu he would have been revested in his rights as an unpaid vendor as against Kiell. It is pretty well settled now that it would not have rescinded the contract. But before the end of the transitus came, his right to stop the goods in transitu might be defeated by an indorsement upon the bill of lading to a person who gave value. In the present case there was such an indorsement and transfer of the bill of lading, but it was only an indorsement and transfer for a particular and limited purpose. It appears that Mr. Kiell, in order to obtain an advance, got Messrs. T. Wiseman & Co., of Glasgow, the correspondents and agents of Messrs. Wiseman, Mitchell, Reid & Co., of Calcutta, to make an advance in his favour by drawing a bill of exchange upon him ; and to secure the payment of that bill of exchange the bill of lading was indorsed, and the Bank of Scotland, who discounted or took that bill, became holders of the bill of lading for the purpose of protecting themselves. It was clearly a transfer for value to the Bank of Scotland, and as such, so far as that went, it defeated the right of the stoppage in transitu at law. But the unpaid vendor's right, except so far as the interest had passed by the pledging of the bill of lading to the pledgee or the mortgagee, whichever it was, enabled the unpaid vendor in equity to stop in transitu everything which was not covered by that pledge. That was settled and has been considered law, or rather equity, ever since the case of In re Westzinlhus (r), and has been affirmed in Spalding v. Ruding (s) ; and I have no doubt it is very good law upon that point " (t). " Instrument of title." Apparently no significance is to be attached to the variation from " document showing title to the goods " in s. 102 to " instrument of title " in s. 103. The meaning of "instrument of title" (r) (1833) 5 B. & Ad. 817, 39 E. R. '(0 Kem P v - Falk ( 1882 ) 7 A PP- Ca - at 665. P- 581. 0) (1843) 6 Beav. 376, 63 R. R. 120. MEANING OF " INSTRUMENT OF TITLE." 405 was considered by Sargent, C.J., in The G. I. P. Ry. Co. v. Hanmandas (u), Ss. where it was held that a railway receipt was not an instrument of title *""> **' within the meaning of this section, and that the indorsing and handing over of such a receipt, though it was to secure an advance made specifically ^ upon it, did not constitute such an assignment as was contemplated by the *, $ section. The learned Chief Justice there stated that the expression * / b " instrument of title " in this section could not properly be construed in ' */' the light of s. 4 of Act XX of 1844 (#), however much that section might ' assist in construing the term " document showing title " in s. 108 (p. 410, below), which was virtually substituted for that Act, and is in pari materia. Nor could that expression be interpreted in the light of the English Factors Act of 1877, for though under that enactment a railway receipt would be a document of title for the purposes of defeating the right of stoppage, that Act was not extended to India. The learned Judge added that it was more reasonable to presume that the expression " instrument of title " was left by the framers of the Contract Act to be construed with reference to the decisions in force in the English Courts when the Contract Act came into force, the principal decision being that of the Exchequer Court in 1846 in Farina v. Home (y), where it was held that a delivery warrant signed by a wharfinger, whereby the goods were made deliverable to the plaintiff or his assignee by indorsement, was no more than a token of authority to receive possession, and that there was no constructive delivery to the assignee until the wharfinger had attorned to the assignee and agreed with him to hold the goods for him. Specific advance. " The requirements of the section are complied with when it is shown that any sum is advanced on the terms that it is to be secured by the particular bill of lading in question or the goods repre- sented by it, though it may be secured by other bills or goods also, and though the bill of lading may have been intended to be security not only for the particular sum or sums advanced upon it, but also for some antecedent liability " (2). 104. The seller may effect stoppage in transit, either stoppage how by taking actual possession of the goods, or by giving notice of his claim to the carrier or other depositary in whose possession they are. () (1889) 14 Bom. 57, 6669. (y) 16 M. & W. 119, 73 R. R. 433. (./) This Act extended to India ,the (c) Per Our., Peacock v. Baijnnth provisions of the English Factors Act, (1891) 18 Cal. 573, 590, 591, L. R. 18 Ind. 5 & 6 Viet. c. 39, but was repealed by the Ap. 78. There was an appeal to the Privy Contract Act. Council, but no judgment on this point. THE INDIAN CONTRACT ACT. . Ss. This enactment cannot be made plainer by illustration. It corresponds 100. t j on g se ttled English law. "At one time it seems to have been supposed," wrote Lord Blackburn, " that in order to make a good stoppage in transitu there must have been an actual taking possession of the goods by the vendor or his agent, but it is now clearly settled that the vendor's rights are complete on giving the person who has the possession of the goods notice of the vendor's claim to stop the goods at a time when he can obey it, although there is neither an actual taking of possession by the person stopping the goods, nor such an assent on the part of the holder as would amount to a constructive possession " (a). The language of the English Sale of Goods Act, s. 46, is almost identical. 105. Such notice may be given, either to the person Notice of seller's wno nas the immediate possession of the goods, or to the principal whose servant has posses- sion. In the latter case, the notice must be given at such a time, and under such circumstances, that the principal, by the exercise of reasonable diligence, may communicate it to his servant in time to prevent a delivery to the buyer. i The latter part of this section closely follows the words of the judgment of the Court of Exchequer in Whitehead v. Anderson (b) : " The only duty that can be imposed on the absent principal is to use reasonable diligence to prevent the delivery." Where the transit is by sea, the description of " the principal whose servant has possession " appears to include the shipowner, who is the person most likely to know where the ship and its master are to be found. Lord Blackburn said in the House of Lords in 1882, commenting on a doubt expressed in the Court of Appeal : " I have always thought that a stoppage, if effected thus, was a sufficient stoppage in transitu. I have always thought that when the shipowner, having received such a notice, used reasonable diligence and sent the notice on, and it arrived before the goods were delivered, that was a perfect stoppage in transitu " (c). It is at least doubtful whether a notice of stoppage in transit addressed only to the consignee, and not to the shipowner or master, is effectual (d). O) Blackburn on Sale, 1st ed. (1845) (c) Kemp v. Folk, 1 App. Ca. at p. 585, 267. (rf) P/telpg, Sfokeg fy Co. v. Comber (V) (1842) 9 M. & W. 318, 534; 60 (1885) 29 Ch. Div. 813, 822, 826. R. R. 819, 832. RESALE ON DEFAULT OF BUYER. 407 106. Stoppage in transit entitles the seller to hold the Ss. Right of seller on g 00 ^ 8 stopped until the price of the whole of stoppage. Illustration. A. sells to B. 100 bales of cotton ; 60 bales having come into B.'s possession, and 40 being still in transit, B. becomes insolvent, and A., being still unpaid, stops the 40 bales in transit. A. is entitled to hold the 40 bales until the price of the 100 bales is paid. Resale. 107. Where the buyer of goods fails to perform his part Resale on buyer's of tne contract, either by not taking the goods failure to perform. ^ t() nmlj Qr by not paying for them, the seller, having a lien on the goods, or having stopped them in transit, may, after giving notice to the buyer of his intention to do so, resell them, after the lapse of a reasonable time, and the buyer must bear any loss, but is not entitled to any profit which may occur on such resale. Resale. The effect of stoppage in transit is not to rescind the contract of sale, but to replace the seller in the position of an unpaid seller who has not parted with the possession of the goods (e). It remains to see what are his rights and remedies in that position. Lord Blackburn expressed the opinion long ago " that, viewing it as a practical question, the most convenient doctrine would be to consider the vendor as entitled in all cases to hold the goods as a security for the price, with a power of resale to be exercised, in case the delay of payment was unreasonably long, in such a manner as might be fair and reasonable under all the circum- stances " ; and that " the establishment of this principle would do very little violence to the decided cases." It is certain that an unpaid seller is not justified in reselling the goods in the face of a tender of the price by the buyer, though the buyer may have been for some time in default (/) ; that, the buyer being in default, the unpaid seller is in some circumstances wholly justified in reselling, as when the goods are perishable (#) ; that (e) Sale of Goods Act, 1893, s.48, follow- point. ing (among other authoritative dicta) the {f)Martindale v. Smith (1841) 1 Q. B. opinion of Lord Blackburn in Kemp v. 389, 55 R. R. 285. Falk, 7 App. Ca. at p. 581. There has (g~) Maclean^ v. Dunn (1828) 4 Bing. never been any direct decision on this 722, 29 R. R. 714. 408 THE INDIAN CONTRACT ACT. S. 107. even when he is not wholly justified the second buyer gets a practically good title by the resale (h) ; and that if the resale is at a loss the seller may still treat the contract as subsisting and recover damages from the buyer, which may be a practicable course if the buyer, not being insolvent, has wrongfully refused to accept the goods ('). In strictness the seller was generally not entitled to resell even when the buyer was in default, though it is difficult to understand why the Courts felt bound so to decide ; but as the buyer could in no case recover more than his actual damage (notwithstanding that the unauthorised resale is technically a conversion, and in an action of trover the measure of damages was generally the value of the goods), this was of very little importance before the Judicature Acts, and is now of none(,/). The Sale of Goods Act, 1893, following a suggestion made in the Judicial Committee in 186G(&), has expressly authorised resale where the buyer, after notice of the seller's intention to resell, fails to pay or tender the price within a reasonable time (I). S. 107 of the present Act is apparently founded on the same dictum, and in the result the English and the Indian rules may be said, since 1893 at all events, to be identical. Eight of resale does not bar other remedies. The present section does not deprive an unpaid vendor of goods of any other remedy he may have. He is at liberty to rescind the contract under s. 55 if that section applies (m). " We are bound, I think, to determine questions of this kind, so far as we can, by reference to the Contract Act and not to English law ; and ss. 51 58 appear to contain general provisions which are applicable to all cases of reciprocal promises" (w). " No doubt s. 107 declares one remedy, but it is only a partial remedy, for the purchaser might be insolvent, and the market depressed, in which case it would be small satisfaction for the vendor to resell " (o). Similarly, where property in goods sold had passed to the purchaser, and after paying for and taking delivery of a part he wrongfully declined to take delivery of the rest, and the undelivered portion was subse- quently destroyed by fire, it was held in a suit by the vendor for the (A) The first purchaser, while he is in purposes to refer to the authorities in default, is not entitled to the possession detail. of the goods, and therefore cannot sue to (A) Page v. Coioasjee Eduljre, L. R. 1 recover the goods or their value. This is P. C. 127, 145. the result of many authorities, and the (Z) S. 47 (3). Sale of Goods Act, 1893, s. 47 (2), declares (m) Buldeo Doss v. Howe (1880) 6 Cal. positively that the sub-purchaser acquires 64. a good title. () f> Cal. per Garth, C.J., at p. 08. (/) Maalean v. Dunn (1828) 4 Bing. (o) Ib. per Pontifex, J., at p. 69. See 722, 29 R. R. 714. also Buchanan v. Ardall (1875) 15 (j) It would be quite useless for Indian B. L. R. 276, 292. RESALE : WHEN RIGHT EXERCISABLE. 409 balance of the purchase-money that, though the plaintiff might have sold Ss. 107 108 the undelivered portion under this section after the defendant had refused to perform his contract, he was not bound to do so, and the omission to take that course did not affect his right to recover the balance sued for. Resale clause in indents. The words of the section seem to imp\y that the statutory right of resale arises only where the property in the goods has passed teethe purchaser_X??). In contracts of "indent," however, it is usual to provide that on default on the part of the purchaser to pay for and take delivery of the goods within a specified time the vendor should be at liberty to resell the goods, and that the purchaser should pay all loss arising on the contract with interest. To such a case the present section does not apply, and a suit will lie for the loss on resale irrespective of whether the property in goods has passed to the purchaser or not (q). According to English authority, the exercise of an expressly reserved power of sale rescinds the contract (r), whereas resale apart from any such con- vention, whether otherwise rightful or wrongful, does not. Reasonable time. The provision of s. 107 as to reasonable time must, of course, be observed. Thus it was held that a resale was not valid whei'e it was hurried on in an unusual manner, and without proper advertise- ment (s). Again, if a seller elects to resell, he must do so within a reasonable time from the date on which the contract was finally repudiated by the buyer, as undue hardship might otherwise be caused to the buyer ; for a seller may, with the deliberate intention of causing loss to the buyer, delay the resale until the market has fallen, and then resell the property and thereby cause to the buyer a loss which he might not have sustained had the resale taken place within a reasonable time from the date of the breach (). What is a reasonable time is a question of fact. Title. 108. No seller can give to the buyer of goods a better title to those goods than he has himself, except Title conveyed . " by seller of goods m the following cases : to buyer. TTTI Exception 1. When any person is, by O) dire Jute Mills Co. v. Ebraliim John Smidt (1899) 22 All. 55,65; Best Arab (1896) 24 Cal. 177 ; Yule Sf Co. v. v. Hajl Muhammad (1898) 23 Mad. 18. Mahomed Hossain (1896) 24 Cal. 124; (r) Lamond v. Davall (1847) 9 Q. B. and see Haridas v. Kalumull (1903) 30 1030, 72 R. R. 502. Cal. 649. (s') BncJianan v. Ardall (1875) 15 (). It may here be noted that, though the expression "notwithstanding any instructions of the owner to the contrary " is omitted in s. 178, which deals with the case of pledge by an ostensible owner, the word " possession " occurring in that section means juridical possession as distinguished from mere custody (q). Where A. has acquired the possession of goods not with such consent on the part of the real owner as would enable A. to give a good title, and A. then forms a partnership with innocent persons B. and C. for the purpose of dealing in the goods, B. and C. supposing A. to have bond fide possession, and B. and C. in the course of the partnership business sell the goods to an innocent purchaser D., the vice in A.'s possession vitiates the possession of B. and C., who acquire no title and are guilty of conversion in selling to D. (r) An attempted transfer of ownership by a person who is not in possession (n) Greenwood \.Holquette (1873) 12 possession of the goods, he led the creditor B. L. R. 46, 47. to believe that the seller was the owner ; (o) S/uinkarv. Molianlal (1887) 11 Bom. which is really too absurd for discussion. 704. It follows from what has been stated If the Chief Court were right, the Excep- above that if a buyer of horses leaves them tion would cover every bailee indeed with the seller for facilities of exercise why not every servant ? and every such and training, the buyer agreeing to pay person would be able to give a buyer from for the keep of the horses, and the seller him an indefeasible title to the goods in afterwards delivers them to a creditor of his custody. It is most unfortunate that his in satisfaction of a debt, who receives such decisions, if they must sometimes the same without notice of the sale, the occur, should be reported, property in the horses does not pass to (^) Le Geyt v. Harvey (1884) 8 Bom. the creditor, and the buyer can recover 501, 509. them or their value from the creditor. (q) Seager v. Hukma Kessa (1900) 24 The contrary, however, has been held by Bom. 458 ; Siddomoye Ddbee v. Sittaram the Chief Court of the Punjab in Framjl (1878) 4 Cal. 497. v. McGregor (1902) Punj. Rec. no. 27. (r) Oppenheimer v. Frazer % Wycttt The ground of the decision is that, the [1907] 2 K. B. 50. buyer having allowed the seller to retain 41C THE INDIAN CONTRACT ACT. S. 108. to a person who is already in possession will obviously not be helped by the present exception (). Seller with voidable title. Under the third exception (t) a seller may give a better title to the buyer than he himself has, though he may not be in possession of the goods by the free consent of the owner, and the possession may not have been acquired under such circumstances that the owner of the goods may give instructions to the person in possession. It is clear that if possession is obtained under a contract that is voidable (ss. 19, 19^) on the ground of coercion (s. 15), undue influence (s. 16), fraud (s. 17), or misrepresentation (s. 18), there can be no free consent (s. 14). And it is equally clear that if such a contract is one of sale, as in Illustration (e), there can be no room for any instructions by the owner to the person in possession. But though a seller in possession of goods under a voidable contract may transfer the ownership thereof, he cannot do so after the contract is rescinded by the owner. And even before rescission the ownership cannot be transferred, if the circumstances which render the con- tract voidable amount to an offence, e.g. wrongful intimidation, cheating (u], or forgery, as in Illustration (f). In Illustration (a) B. has obtained posses- sion of the cow by the offence of theft. Here the possession is not acquired under a contract, and the case, therefore, does not come within the third exception ; nor is it covered by the first exception, because the possession is not obtained "by the consent of the owner." The general rule of law laid down in the first paragraph of the section will, therefore, apply, and as B. has no title to the cow, he can transfer none to A. In such a case the cow may be transferred to its owner under s. 517 of the Criminal Procedure Code (V. of 1898) ; *nd if B. is convicted of theft, the Court dealing with the offence may, under s. 519, direct payment to A. of the price paid by (*) It makes no difference that the sale decree is subsisting, rescind the contract is in market overt : Faiz Ahmad v. King- and sue C. for recovery of the jewels from Emperor (1908) Punj. Rec. Or. no. 2. him. " After [B.] had thus obtained the Cj>. Nicholson v. Harper [1895] 2Ch. 415. decree which is subsisting, [he] could no () We postpone comment on the second longer elect to avoid the contract. That exception, which is in different matter. being so, at the date of the suit [B.] had (.) A. induces B., by cheating, to sell not only no title to the property, but [he] and deliver jewels to him. A. seUs the jewels was not in a position to avoid the contract toC. Here the contract between A. and B. so as to divest the property from [C.] is voidable, and the circumstances which with the result of revesting it in [him] " : render the contract voidable amounted to Tholasirum v. Duraji (1905) 15 Mad. L. J. an offence. The property in the jewels, 375. B., having affirmed the contract by therefore, is not transferred to C., and B. suing on it, is estopped from denying that is entitled to recover them from C. But the property passed. It seems, however, if B., with knowledge of the fact that he by reason of the words of the Act, that was cheated by A., sues A. and obtains a C.'s title is by estoppel only, decree against him, he cannot, while the TITLE OF SELLER. 417 him out of moneys, if any, taken out of B.'s possession on his arrest. As to s. 108. the rights of a transferee of a negotiable instrument obtained by means of an offence or fraud, see Negotiable Instruments Act XXVI of 1881, s. 58. See also Indian Trust Act II of 1882, s. 64. The use of the word " offence " in this section has not caused, nor is it likely to cause, any difficulty. The word is defined in the General Clauses Act X of 1897 as "any act or omission made punishable by any law for the time being in force " (s. 3). This definition, however, does not apply to any enactments prior to that Act (ss. 3, 4). There is no definition of the word "offence" in the General Clauses Act I of 1868. The only enact- ment prior to the Contract Act in which that word is defined is the Indian Penal Code (XLV.), s. 40, where it is confined to an act or omission punish- able by the Code. Though there is nothing in the present section to indicate that the word is used in that limited sense, it is difficult to conceive what offence other than some one defined in the Penal Code can be con- stituted by circumstances which render a contract voidable at the option of the other party thereto. It will be observed that the terms of this exception are wider than those of s. 23 of the English Sale of Goods Act, which seems to be limited to cases where property and not merely possession has been acquired under a voidable contract. Good faith, etc. It is necessary both under the first and third excep- tions that the buyer should act in good faith. The term "good faith" is defined in the Indian Penal Code, s. 52 : " Nothing is said to be done or believed in good faith which is done or believed without care and attention." Though the definition of an expression in a penal statute should not be literally applied to an enactment exclusively civil, it is submitted that the above definition in fact embodies the sense in which "good faith" is generally understood in civil law, and therefore may be taken as a practical guide in construing the present section. It is conceived that a buyer would be deemed to have acted in good faith within the meaning of this section if he acted with the " care and attention " expected of a man of ordinary prudence. Regarded from this point of view, the other condition that the purchase must have been made by the buyer under circumstances which do not raise a reasonable presumption that the seller has no right to sell may be regarded as merely explanatory of " good faith " ; for it is clear that a buyer cannot be said to act in good faith if he purchases from an ostensible owner under circumstances raising a reasonable presumption that he has no right to sell. The presumption, again, must be a " reason- able" one, and the mere proof of a fact giving rise to a vague suspicion that the seller had no authority to sell would not be sufficient to shift on the buyer the burden of proving good faith. i.e. 27 418 THE INDIAN CONTRACT ACT. S. 108. Documents showing title to goods. All the documents enumerated in this section, excepting warehouse-keeper's certificate and wharfinger's certificate, were specified in s. 4 of the English Factors Act of 1842 (5 & 6 Viet. c. 39), which was extended to British India by Act XX of 1844. i Whether a railway receipt is a document showing title to goods within the meaning of this section has not been specifically decided. Such a receipt, at any rate, is not an instrument of title as contemplated by s. 103 (p. 402, above) (x). But the scope and object of the two sections are widely different, and though the transfer of a particular document may not avail to defeat the vendor's right of stoppage in transit under s. 103, it may yet operate to pass a good title to the goods to a bond fide purchaser under this section ; and such, it would seem, is the effect of a railway receipt (y)-. A mate's receipt for goods shipped on board a vessel is not a document of title (2). Second Exception: "joint owners"; Presumption in case of joint Hindu family. Where one member of a joint Hindu family is found to be in possession of any property, the family being presumed to be joint in estate, the presumption is that he was in possession of it not as separate property acquired by him, but as a member of a joint family (a). See Illustration (d). Delivery order (Illustration (e) ). By the Common Law of England a delivery order is regarded as a mere token of authority to deliver ; and before the wharfinger has attorned it does not, independently of statute or custom, enable the purchaser to confer a title upon a vendee or a sub-vendee free from the vendor's lien for the price (). The Indian Contract Act gives no larger effect, except by s. 108, to a delivery order than it had by English common law. S. 90, Illustration (e), read withss. 95 and 98, shows that the giving a delivery order by a vendor to a vendee does not of itself give the vendee such a possession of the goods as to defeat the vendor's lien. The English Factors Acts, 4 Geo. IV. c. 83 and 6 Geo. IV. c. 94, which were extended to India by Act XIII of 1840, and 5 & 6 Viet. c. 39, which was extended to this country by Act XX of 1844, created statutory exceptions to the common law rule in the cases of " agents " entrusted with certain mercantile documents, including a delivery order, but the Indian Acts have been repealed by the Contract Act (c). (x) 6. 1. P. B. Co. v. Hanmandas (1889) 14 Bom. 57. (y) See Transfer of Property Act IV of 1882, s. 137, where a railway receipt is specified as one of the " mercantile docu- ments of title to goods." (z) Juggernath Augurwallah v. Smith (1906) 33 Cal. 547, at p. 559. (a) Taruck CJiunder v. Jodeshur Chunder (1873) 11 B. L. E. 193. (J) Farina v. Home (1846) 16 M. &, W. 119, 73 R. R. 433 ; Eioan y. Smith (1849) 2 H. L. C. 309. (c) Le Geyt v. Harvey (1884) 8 Bom. 501, 508. WARRANTY. 419 Warranty S. 109. 109. If the buyer, or any person claiming under him, is, by reason of the invalidity of the seller's Seller's responsi- bility for badness title, deprived of the thing sold, the seller is of title. responsible to the buyer, or the person claim- ing under him, for loss caused thereby, unless a contrary intention appears by the contract. Warranty and Condition. In England the word " warranty " has been used with several different meanings and shades of meaning, and often obscurely ; and the difficulty has been increased by some of those meanings overlapping some of the meanings of the word "condition." Full dis- cussion may be found in the works of Sir William Anson (d) and Sir Mackenzie Chalmers (e). This Act avoids the use of "condition" in the present connection, but does not define " warranty." It uses the word warranty both in the sense of the " condition " and the " warranty " of the English Sale of Goods Act. In s. 117 "warranty" is used in the strict sense in which it is iised in English law ; in s. 118 it is used in the wider sense of the English " condition." The following summary remarks may be found useful as a guide to the intention of the Act and to the under- standing of English authorities in which these terms occur. In the first place, it is to be borne in mind that a contracting party is bound to perform his contract according to its terms, to deliver the specific goods if he sold ascertained goods, or to supply goods answering the description in the contract if he contracted to sell goods not ascertained. Offer of a thing different from what was contracted for is not a breach of one term, but a total failure to perform the contract. " If a man offers to buy peas of another, and he sends him beans, he does not perform his contract ; but that is not a warranty. There is no warranty that he should sell him peas ; the contract is to sell peas, and if he sends him anything else in their stead it is a non-performance of it " (/). The existence of special conventional provisions as to this or that part of the contract does not derogate from the duty of performance as a whole. Now the parties, if such is their will, may put the contents of any par- ticular statement or promise which passes between them on the same footing (d~) Contract, llth ed. 167, 330. Aztmar v. Casella (1867) L. R. 2 C. P. at (e) On the Sale of Goods Act, 174. p. 679 ; Drummond v. Van Ingen (1887) (/) Lord Abinger, C.B., in Chanter v. 12 App. Ca. 284 ; and see Pollock on Hopkins (1838) 4 M. & W. at p. 404, 51 Contract, 527, 530. R. R. at pp. 654, 655, approved in Ex. Ch. 272 420 THE INDIAN CONTRACT ACT. S. 109. ns the description of the thing contracted for, so that, if it is not made good by the party undertaking it, the failure is deemed to be a total failure of performance, and the other is wholly discharged. This is a condition in the proper sense. There may also be, and there occur in common practice, auxiliary pro- mises or undertakings of which the breach is not intended to avoid the contract, but only to give a remedy in damages. These are warranties in the proper sense. But a condition may include a warranty ; that is to say, a seller's undertaking may be such that the buyer may waive it as a condition by accepting performance, but may still have a remedy in damages for the failure in that particular undertaking. And " a stipulation may be a con- dition though called a warranty in the contract " (g). The question is, What was the real intention, taking the contract as a whole ? To many contracts conditions, breach of which may be treated by the buyer as avoiding the contract, or, if he exercises his right of waiver, as giving a right to damages, are annexed by the law although the parties have used no express words that would create such a stipulation. These are called implied conditions, and are enforced on the ground that the law infers from all the circumstances of the case that the parties intended to add such a stipulation to their contract, but did not put it into express words. The existence of an implied condition or warranty may be rebutted by proof of facts which show a contrary intention. Confusion has been created in this branch of law by use of the term implied ivarranty to denote what is really an implied condition. Sometimes a warranty, in the strict sense of the term, is implied by law where no inference would arise of an implied condition. (See s. 117, post, and note.) Whether the property in goods sold passes to the purchaser or not^he is entitled to reject the goods if they are not in accordance with the_de- scription in the contract, provided that the description forms an actual part of the conditions of the contract, and not something collateral to it. " Under the law in this country, a man is not bound, unless he has altered his position by some conduct of his own, to accept and to pay for gopds which are not in accordance with the description of the goods he bargained for. If any statutory authority is necessary for that, we think the general principle laid down in s. 51 of the Contract Act applies to the case" (h}. Seller responsible for title. It was formerly said that by the Com- mon Law the seller of goods was not bound, unless by express agreement, (g) Sale of Goods Act, 1893, s. 11 ; Barnardv. Faber [1893] 1 Q. B. 340, C. A. (A) Mitchell, Reid $ Co. v . Buldeo Doss (.1887) 15 Cal. 1, 4, 5. S. 51 of the Act does not appear to us, with great sub- mission, to be much to the purpose. IMPLIED WARRANTY : TITLE. 421 to answer for his title to the goods sold. But the exceptions allowed to the Ss. supposed rule were, in the modern authorities, of more importance than the 1 ""> H" - rule. It was admitted that there was an " implied warranty of title " if the seller affirmed the goods to be his own, and he was deemed to make that affirmation when goods were sold at a shop or warehouse where the seller usually dealt with such goods. Further, it was allowed that on a sale of unascertained goods the seller answered for his title (i}. On the whole it seems to be the modern common law, and it certainly is so held in America, that the occasions when the seller does not warrant his title are really exceptional. One class of such occasions is where the seller is executing an authority given by law which overrides the general owner's title, as on the sale of a forfeited pledge by a pawnbroker (&), or goods taken in execution by a sheriff (7), or where he derives his title through a sale under such authority. There may also be an understanding in fact between the parties that the seller is dealing only with such interest as he may have; in that case any implied warranty is, on general principles, excluded (m). However this may be, the present section has given effect to the modern view in British India, and twenty-one years later s. 12 of the Sale of Goods Act did the same for England in a more elaborate form. In exceptional cases like that of the sale of goods taken in execution the English authorities are followed here (n). 110. An implied warranty of goodness or quality may Establishment of be established by the custom of any particular implied warranty of , -j goodness or quality, trade. Warranty implied by usage of trade. This section is founded on Jones v. Boivden (o), where it was held that a trade usage to declare any sea-damage on the sale of drugs by auction had the effect of creating a (i) See Eichliolz v. Bannister (1864) sheriff or execution creditor: Fra-ntji v. 17 CrB. N. S. 708, and citation thereof in Hormasji (1877) 2 Bom. 258. Framji v. Hormasji (1877) 2 Bom. 258, (in) Baguelcy v. Haivley (1867) L. R. 2 263. C. P. 625, where the Court was divided in (It) Morleij v. Attenlorough (1849) 3 opinion upon the facts. Ex. 500, 77 R. K. 709. (n) Dorab Ally v. Executors of Kkajah (I) Ex parte Villars (1874) L. 11. 9 Ch. Moheeoodeen (1878) 3 Gal. 806, 813, L. R. 5 432, 437. But an express assertion that Ind. Ap. 116. A sheriff selling property the goods are the property of the execu- taken in execution does undertake that tion debtor will amount to a warranty to he is acting within his jurisdiction : ib. the buyer, to the extent at all events of (o) (1814) 4 Taunt. 847, 14 R. R. 683. the purchase-money in the hands of the 422 THE INDIAN CONTRACT ACT. g s> warranty that drugs so sold without any declaration were free from sea- 110, 111. damage. Cp. Sale of Goods Act, 1893, s. 14, sub-s. 3. Trade usage might, on the other hand, have the effect of dispensing with what would otherwise be part of the obligation of a contract, or reducing a condition to a warranty. But any such usage must, of course, be proved if it is relied upon. "If the custom went the length of saying that there should be no remedy for any variation in the quality contracted for, it would of course be unreasonable, for it would absolutely alter the nature of the contract " (/>). An importing firm which accepts a commission to order out goods from Europe at a specified rate, and undertakes that the goods will be invoiced to the indentor at that rate, does not, in the absence of proof of usage to the contrary, fulfil its contract by offering to the indentor goods procured in Bombay from another firm in Bombay, though they answer the description of the goods in the order (q). The actual decision has in itself nothing to do with warranty, but only illustrates the general rule that all express terms of a contract are presumed to be material. It is not clear from the report why the Court thought any question of importance was involved ; but the arguments, as is too common in Indian reports, are wholly omitted. Merchandise Marks Act IV of 1889. Besides the implied warranties enumerated in this and the following sections, there is another s\ich warranty established by s. 17 of the above Act, in respect of trade mark and trade description. sa ^ e ^ provisions, there is on sale of pro- an implied warranty that they are sound. visions. Warranty on sale of provisions. This is in accordance with the law as stated by Blackstone : " In contracts for provisions, it is always implied that they are wholesome ; and if they be not, the same remedy [an action for damages, then regarded as an action in tort for deceit] may be had " (r). But later authorities did not allow this to be applicable to a sale of specific goods where the buyer had an opportunity of inspection ; for " the undoubted general law is, that, in the absence of all fraud, if a specific article is sold, the buyer having an opportunity to examine it and selecting it, the rule of caveat ernptor applies " (s). The law was thus declared by the Court of (p) Re Walkers, Winter, and Hamm (r) Comm. iii. 166. and Shaw $ Co. [1904] 2 K. B. at p. 158. (*) Emmerton v. Matthews t(1862) 7 (q) Jiombay United Merchants 6l>. v. H. & N. 586. Doolubram (1887) 12 Bom. 50. IMPLIED WARRANTIES. 423 Exchequer, and a few years later the Court of Queen's Bench apparently Ss. thought the deduction correct : "So in the case of a sale in a market of m> 112. meat, which the buyer had inspected, but which was in fact diseased, and unfit for food, although that fact was not apparent on examination, and the seller was not aware of it, it was held that there was no implied warranty that it was fit for food, and that the maxim caveat emptor applied " (i). But now, many, if not all, such cases are within the rules laid down in s. 14 of the Sale of Goods Act. The plaintiff entered a public-house licensed for the sale of beer to be consumed on the premises, knowing that all the beer sold at that house was supplied from H.'s brewery, and with the object of getting H.'s beer because he preferred it. He was afterwards seized with illness, and the jury found that the illness was to a large extent due to arsenical poisoning caused by arsenic being present in the beer, and that he had contributed to the poisoning by excessive drinking ; they further found that the plaintiff did not rely for the good quality of his beer on the skill or judgment of the defendant, the keeper of the public-house, and that the plaintiff had sustained damage to the amount of 50. The Court of Appeal held that a verdict had been rightly entered for the plaintiff, on the ground that he had bought goods from a seller who dealt in goods of that description, and that there was an implied condition that they should be of merchantable quality (u). If the jury do not find that the buyer did not rely on the seller's skill and judgment, sub-section (1) of s. 14 can be applied in many cases (#). For British India the law is brought back to Blackstone's opinion by the present section. It is conceived that " sound " means " wholesome," and does not import a warranty of perfect condition and flavour, in wine or spices for example. 112. On the sale of goods by sample, there is an Warranty of bulk implied warranty that the bulk is equal in implied on sale of -, . . ,-, i goods by sample, quality to the sample. Warranty on sale of goods by sample. At common law the legal effect of a sale by sample is " as if the seller had in express terms warranted that the goods sold should answer the description.of a small parcel exhibited at the time of the sale," and that, as a general rule, " the purchaser may reject the commodity if it does not correspond with the sample " (y), but (as (0 Jones v. Just (1868) L. K. 3 Q. B. [1905] 1 K. B. 608, C. A., and see s. Ill 197, 202. post. (>/) Wren v. Holt [1903] 1 K. B. 611. (y] Parlter v. Palmer (1821) 4 B. & See S. 14 (2) of the Sale of Goods Act. Aid. 387, 391; 23 R. R. 313, 313, per (x) Frost v. Aylesbury Dairy Co. Abbott, C.J. THE INDIAN CONTRACT ACT. 112. in other like cases) not after he has accepted the goods or dealt with them as his own (z). The buyer is entitled to reasonable facilities for inspecting the bulk independently of any local or trade usage to that effect (a) ; and if there is any latent defect in the sample (that is, a defect not discoverable by the ordinary examination of a prudent buyer) which, if present in the bulk, would render the goods unmerchantable, the sample is to be taken as if free from it (6). All these rules are now embodied in the English Sale of Goods Act, s. 15. The last of them is really a special application of the principle that the seller's duty to furnish merchantable goods answering the descrip- tion in the contract is paramount to any particular warranty. It will not avail him that the sample was faulty. " When a purchaser states generally the kind of article he requires, and asks the manufacturer to supply specimens of the mode in which he proposes to carry out the order, he trusts to the skill of the manufacturer just as much as if he asked for no such specimens. And I think he has a right to rely on the samples supplied representing a manufactured article which will be fit for the purposes for which such an article is ordinarily used, just as much as he has a right to rely on manufactured goods supplied on an order without samples complying with such a warranty " (c). " Neither inspection of bulk nor use of sample absolutely excludes an inquiry whether the thing supplied was otherwise in accordance with the contract " (d). This is so even where goods have been expressly warranted only equal to sample ; for such a term limits the buyer's right to complain of the quality, but does not deprive him of the right to have the kind of goods he bargained for (see s. 113, below). A sale at which a specimen of the goods is exhibited may neverthe- I less not be a sale by sample ; for it is consistent with the buyer relying on I the description alone and not stipulating for conformity to the specimen I produced (e). This distinction is not likely to be of frequent importance in modern practice. A mistake in the sample exhibited may prevent the formation of any contract at all, as where the sample is inadvertently taken from a bulk different from the specific bulk intended and expressed to be sold. It is hardly needful to say that such cases are rare (/). (z) Parker v. Palmer, last note. (d) Mody v. Greg son (1868) L. R. 4 Ex. (a) Lorymer v. Smith (1822) 1 B. & C. 1. 49, 56, judgment of Ex. Ch. per Willes, J. (b) Hellbutt v. Hicltson (1872) L. K. 7 (e) Gardiner v. Gray (1815) 4 Camp. C. P. 438. See Benjamin on Sale, 4th ed. 144, 16 R. R. 764. 646 (shorter in 5th ed. 647). (/) Megaio v. Molloy (1878) 2 L. R. Ir. (e) Per Lord Herschell in Dniminond v. 530. Van Ingen (1887) 12 App. Ca. 284, 294. IMPLIED WARRANTIES. 425 113. Where goods are sold as being of a certain S. 113. denomination, there is an implied warranty Warranty implied where goods are that they are such goods as are commercially sold as being of a 1111 certain denomina- known by that denomination, although the tion. buyer may have bought them by sample, or after inspection of the bulk. Explanation. But if the contract specifically states that the goods, though sold as of a certain denomination, are not warranted to be of that denomination, there is no implied warranty. Illustrations. (a) A., at Calcutta, sells to B. twelve bags of " waste silk " then on its way from Murshedabad to Calcutta. There is au implied warranty by A. that the silk shall be such as is known in the market under the denomination of "waste silk." [Gardiner v. Gray, 4 Camp. 144 ; 16 B. B. 764.] (b) A. buys by sample, and after having inspected the bulk, 100 balea of " Fair Bengal " cotton. The cotton proves not to be such as is known in the market as " Fair Bengal." There is a breach of warranty. Warranty as to denomination of goods. According to the English authorities, " the purchaser has a right to expect a saleable article answering the description iu the contract " (Lord Ellenborough in Gardiner v. Gray, cited above) if he has not an opportunity of inspection, and to expect an article at all events answering the description, even if he has been able to inspect it. The language of the present section appears to be derived from a summing-up of Erie, C.J., which was approved by the Court of Common Pleas (g). The same case appears to have suggested Illustration (b), where the use of the word warranty is rather unfortunate. The so-called breach of warranty is a failure to perform the contract, which was to supply " Fair Bengal " cotton (see Lord Abinger's classical observation cited at p. 419, above). " Tn general, on the sale of goods by a particular description, whether the vendee is able to inspect them or not, it is an implied term of the con- tract that they shall reasonably answer such description, and if they do not, it is unnecessary to put any other question to the jury." Further, " in every contract to supply goods of a specified description which the buyer has no opportunity to inspect, the goods must not only in fact answer the (00 Josling v. Xingxford (1803) 13 C. B. N. S. 447. THE INDIAN CONTRACT ACT. Ss. specific description, but must also be saleable or merchantable under that 113, 114. description " (h). A special term in the contract providing that inferiority in quality of bulk to sample shall be a matter for allowance does not deprive the buyer of his right to reject goods which do not answer the description in the con- tract, for he did not undertake to accept goods differing in kind from what he bargained for (i). 114. Where goods have been ordered for a specified purpose, for which goods of the denomination Warranty where g . goods ordered fora mentioned in the order are usually sold, there specified purpose. . . 1-1 is an implied warranty by the seller that the goods supplied are fit for that purpose. (A) Jones v. Just (1868) L. R. 3 Q. B. 197, 204, 205 (sale of Manilla hemp to arrive). The hemp when shipped by the seller had been damaged by sea water, though not to his knowledge, so as not to be merchantable. The buyer was held entitled to recover the difference between what it fetched on being resold with all faults and what it would have been worth if shipped in proper condition. (') Azimar v. Casella (1867) L. R. 2 C. P. 431, affirmed in Ex. Ch. ib. 677 (contract for cotton guaranteed equal to a sample which was of Longstaple Salem cotton. " Should the quality prove inferior to the guarantee, a fair allowance to be made" : the bulk turned out to be not Longstaple Salem, but exceptionally good Western Madras, which, however, is inferior to Longstaple Salem, and can- not be manufactured with the same machinery. The buyer was held not bound to accept). There is a much dis- cussed case of Parkinson v. Lee, (1802) 2 East, 314, 6 R. R. 429, which at first sight, and according to the head-note, appears to contradict the rules stated in the text. If it did, it is not law in England, and cannot be of any authority in British India. But in 1868 it was dis- tinguished and approved by a very strong Court, on the ground that the sale was of specific goods (they were hops, a com- modity liable to many accidents and frauds), and " the sample was sound, and the bulk answered the sample at the time of the sale . . . the sample was fair ; the bulk purchased was ascertained and exist- ing, it did, at the time the bargain was made and the property passed, in fact answer the description in the contract, and was the very thing bargained for, and the secret defect which afterwards developed itself, and made the bulk un- merchantable, was not known to the seller nor caused by any act of his " : Mody \. Grcgson, L. R. 4 Ex. 49, 55, judgment of Ex. Ch. delivered by Willes, J. Some years later Lord Esher, then Sir Balliol Brett, said in the Court of Appeal that " either it [Parkinson v. Lee] does not determine the extent of a seller's liability on the contract, or it has been overruled " : Jlundall v. MPWIOU (1877) 2 Q. B. Div. at p. 106. The true explanation seems to be that the case was an application, in very peculiar circumstances, of the principle expressed in s. 116 of the present Act, though perhaps this is of little importance for any Indian purpose. IMPLIED WARRANTIES. 427 Illustration. S. 114. B. orders of A., a copper manufacturer, copper for sheathing a vessel. A., on this order, supplies copper. There is an implied warranty that the copper is fit for sheathing a vessel. [Jones v. Bright (1829) 5 Bing. 533; 30 E. R 728.] English authorities. " On the sale of goods by a manufacturer or dealer to be applied to a particular purpose, it is a term in the contract that they shall reasonably answer that purpose " (It). For, it is said, in such a case, the real object of the contract is not merely goods of a specified kind, but goods of that kind fitjor such use as the buyer is known to contemplate, and goods not fit for such use do not substantially answer the description in the contract (I}. The seller's duty on this point is absolute. It does not depend on any question of negligence, nor is it limited to making good such defects as are discoverable by care and skill. It is a breach of this warranty to supply provisions to a wholesale dealer which, though not actually unwholesome, contain adventitious matter producing effects which alarm the consumer and thereby render the food or drink unmarketable. A firm of distillers agreed to furnish African merchants with whisky coloured to resemble rum. Burnt sugar ought to have been used for this not very laudable but, as between the parties, legally innocent purpose. In fact, logwood was used, and the whisky coloured with it "proved unsaleable, the natives, not unreasonably, fancying it to be poisoned, some of them who tried it having found that it dyed their saliva and other secretions into [sic] the colour of blood." The House of Lords held, on appeal from the Court of Session in Scotland, that the distillers were liable in damages to the merchants (ni). The only sub- stantial defence was an attempt to narrow the issue by reference to the language of the contract ; this is now of no interest. The Court of Appeal in England has held by a majority that on a sale of goods by a maker of such goods, who does not otherwise deal in them, there is, in the absence of agreement or custom of trade to the contrary, a warranty that the goods supplied shall be of his own make (n). Perhaps this would be followed in India, but no decision has been found (o). (/O Jones v. Just, L. R. 3 Q. B. at 1 Sc. & D. 245. See p. 251 for the p. 203. statutory definition of the law of Scotland, (0 liandall v. Newxon (1877) 2 Q. B. now superseded by the Sale of Goods Act ; Div. 102, 109. Qucere whether this see Chalmers at p. 37. deduction be not a little too ingenious; () Johnson v. Raylton (1881) 7 Q. B. but the rule is so well settled that it is Div. 438. Bramwell, L.J., dissented, immaterial whether this is or is not the This rule is not embodied in the Sale of best form of stating the reason. Goods Act ; see Chalmers at p. 35. (in) Macfarlane v. Taylor (1868) L. K. (o) Bombay United Merchants' Co. v. 428 THE INDIAN CONTRACT ACT. Ss. " Have been ordered." It will be observed that the section says : 114, 115. " Where goods have been ordered for a specified purpose," etc. This prevents the rule from extending to the sale of a specific chattel selected or identified by the buyer. " If a party purchases an article upon his own judgment, he cannot afterwards hold the vendor responsible on the ground that the article turns out to be unfit for the purpose for which it was required ; but if he relies upon the judgment of the seller, and informs him of the use to which the article is to be applied, . . . the transaction carries with it an implied warranty that the thing furnished shall be fit and proper for the purpose for which it was designed " (p). The sale of a particular ship, being at the time at sea, " does not imply any contract that it is then seaworthy, or in a serviceable condition " (g). " Where there is a sale of a definite existing chattel specifically described, the actual condition of which is capable of being ascertained by either party, there is no implied warranty " (r). It may be that the description of the goods required, as given by the buyer, points to the fact that they are required for a particular purpose, and in such a case it may be a fair inference that the goods are being ordered for that particular purpose. Where, for example, the plaintiff, who was a draper and had no special skill or knowledge with regard to hot-water bottles, went to a chemist who sold such articles and asked for a " hot-water bottle," it was held that the Court might justly infer that the goods were bought and sold for the specific purpose of being used as a hot-water bottle (s). So in a sale of milk, the jury may reasonably infer that the milk was ordered for the purpose of being consumed as food (). Warranty on sale 115. Upon the sale of an article of a known^sce^tained well-known ascertained kind, there is no implied warranty of its fitness for any particular purpose. Doolubram (see on s. 110, p. 422, above) is that the words " capable of being ascer- not in point, for there was an express tained by either party " do not mean that undertaking to procure the goods from ascertainment is easy, but that it is not Europe. easier for one party than the other ; for (p) Brown v. Edgington (1841) 2 Man. in Barr v. Gibson the ship long before & G. 279, 58 R. R. 408. the days of ocean cables was stranded on (#) Sarr v. Gibson (1838) 3 M. & W. an island in the Gulf of St. Lawrence. 390, 399, 49 R. R. 650, 657, per Parke, B. (*) Preist v. Last [1903] 2 K. B. 148. (r) Jones v. Just (1868) L. R. 3 Q. B. at (f) Frost v. Aylesbury Dairy Co., Ltd. p. 202, citing Barrv. Gibson, which shows [1905] 1 K. B. at p. 612. NO WARRANTY IMPLIED ON SALE OF A SPECIFIC CHATTEL. 429 Illustration. Ss. B. writes to A., the owner of a patent invention for cleaning 115, 116. cotton, "Send me your patent cotton -cleaning machine to clean the cotton at my factory." A. sends the machine according to order. There is an implied warranty by A. that it is the article known as A.'s patent cotton-cleaning machine, but none that it is fit for the particular purpose of cleaning the cotton at B. 's factory. [ Chanter v. Hopkins ( 1 838) 4 M. & W. 399, 51 E. E. 650, where the description was " your patent hopper and apparatus, to fit up my brewing copper with your smoke- consuming furnace " ().] No warranty implied on sale of a specific chattel. The principle is that the bargain is " for the purchase of a specific chattel, which the buyer himself describes, believing, indeed, that it will answer a particular purpose to which he means to put it ; but if it does not, he is not the less on that account bound to pay for it." Accordingly the rule does not cover the case of an executory contract for the supply in bulk of unmanufactured goods, such as coal, though the terms of the contract may require them to be of a description known in the trade (x). If it did, a cotton manufac- turer who bought cotton by such a description as " Fair Bengal," for the purpose, known to the buyer, of making it into such yarn as is usually made of that kind of cotton, would have no remedy in case of its proving useless, unless he had taken an express warranty. The language of the English Sale of Goods Act, s. 14, sub-s. 1 (x), is more precise: "In the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose " ; but it is conceived that there is no substantial difference between the effect of these words and of the present section. 116. In the absence of fraud and of any express warranty of quality, the seller of an article Seller when not . . responsible for which answers the description under which latent defect. . . , , it was sold is not responsible tor a latent defect in it. (w) Ollimnt v. Bayley (1843) 5 Q. B. not capable of being made navigable, is 288, 64 B. B. 501, follows this and adds still a ship, and is effectually sold and nothing to it. The earlier but very little transferred as such between parties earlier case of Barr v. Gitson ( (1838) 3 ignorant of her condition. The present M. & W. 390, 49 B. B. 650) might have rule would apply to the sale of a vessel of raised a similar question, but did not, and novel construction which might or might on the pleadings could not. What it not turn out to be navigable. See also decided was that a ship in itself capable the next following section, of repair, and not a mere wreck, though () Gillespie Bros. $ Co. v. Cheney, much damaged and in the circumstances Eggar % Co. [1896] 2 Q. B. 59. 430 THE INDIAN CONTRACT ACT. Ss. Illustration. 16, 117. A. sells to B. a horse. It turns out that the horse had, at the time of the sale, a defect of which A. was unaware. A. is not responsible for this. " Latent defect." This section and the illustration seem intended to give the effect of Parkinson v. Lee (see remarks on that case, p. 426, ??., above), so far as it is still considered good law. If " latent defect " means any defect of which the seller is not aware, and which is not obvious to the buyer, as the illustration rather suggests, it is an extended use of the term. We commonly understand by a latent defect (though it cannot be said to have a fixed meaning as a term of art) a defect such that no practicable examination made with competent skill and care would discover it (see Headhead v. Midland Ry. Co. (y), passim). 117. Where a specific article, sold with a warranty, has Buyer's right on b een delivered and accepted, and the warranty breach of warranty. ig Broken, the sale is not thereby rendered voidable, but the buyer is entitled to compensation from the seller for loss caused by the breach of warranty. Illustration. A. sells and delivers to B. a horse warranted sound. The horse proves to have been unsound at the time of sale. The sale is not thereby rendered voidable, but B. is entitled to compensation from A. for loss caused by the unsoundness. [Street v. Blay (1831) 2 B. & Ad. 456, 36 E. E. 626 ; but the English rule, which since that case has been treated as settled, is that the purchaser cannot avoid the sale of a specific chattel, except under a condition in the contract or for fraud, after property has passed ; and property may, and often does, pass before delivery and acceptance. See as to this Heilbutt v. Hickson (1872) L. E. 7 0. P. at p. 449. In such case a simple warranty does not entitle the purchaser, at common law, to refuse to accept the goods because the warranty is not fulfilled. It must be presumed that the language of the present section was deliberately chosen, especially as it varies from that of the original draft, which read " where a specific article has been sold with a warranty, and the warranty is broken," etc.] Consequences of breach of warranty : 1. Where a specific article is sold. The law is undoubted, but it is not always easy to determine whether a condition or a mere warranty is intended by the parties. A clause that goods shall be similar to samples may be one or the other. (y) L. R. 2 Q. B. 412 ; 4 Q. B. 379. BREACH OF WARRANTY : UNASCERTAINED GOODS. 431 " Generally speaking, when the contract is as to any [i.e., unascertained] Ss. goods, such a clause is a condition going to the essence of the contract; H7> 118. but when the contract is as to specific goods, the clause is only collateral to the contract, and is the subject of a cross action, or matter in reduction of damages " (2). Similarly it was observed by the Calcutta High Court that where the property in goods had passed to the purchaser, and there had been part delivery, he could rescind the sale only if he could show fraud or mis- representation within the provisions of s. 19 (p. 98, above) (a). The Court thought, however, that the case did not fall within s. 117 at all, because the sale was not of a specific article in the sense of that section, and that, since the goods (the whole of the rice in a specified gola of the plaintiff's) were ascertained, only the last paragraph of s. 118 was applicable. It does not seem obvious that the words " specific article," as used in the present section, though perhaps not the most apt, are not wide enough to cover any goods that are in fact ascertained. At any rate a horse, which is not commonly called an article by English-speaking people, is within the section, as the illustration shows. A breach of warranty within the meaning of this section corresponds exactly to a breach of warranty within the strict meaning of warranty as used in the Sale of Goods Act. 118. Where there has been a contract, with a warranty, Eight of buyer on f r the sale of goods which, at the time STe C S pe?tTgo a o n ds y of the contract, were not ascertained or not not ascertained. j n ex i s t e nce, and the warranty is broken, the buyer may- accept the goods or refuse to accept the goods when tendered, or keep the goods for a time reasonably sufficient for examining and trying them, and then refuse to accept them ; provided that during such time he exercises no other act of ownership over them than is necessary for the purpose of examination and trial (6). (2) Ifeyworth v. Hutcliinson (1867) ownership and nothing else does or does L. R. 2 Q. B. 447, 451. not exceed what is necessary for this (a) Shoshi Mohun Pal v. Nobo Kristo purpose. See Parker v. Wallis (1855) (1878) 4 Cal. 801, 806. 2 E. & B. 21, a case on acceptance under (&) It is a question of fact whether an the Statute of Frauds, act which is not on the face of it an act of 432 , THE INDIAN CONTRACT ACT. S. 118. In any case the buyer is entitled to compensation from the seller for any loss caused by the breach of warranty ; but, if he accepts the goods and intends to claim compensa- tion, he must give notice of his intention to do so within a reasonable time after discovering the breach of the warranty. Illustrations. (a) A. agrees to sell and, without application on B.'s part, deliver to B. 200 bales of unascertained cotton by sample. Cotton not in accordance with sample is delivered to B. B. may return it if he has not kept it longer than a reasonable time for the purpose of examination. (b) B. agrees to buy of A. twenty-five sacks of flour by sample. The flour is delivered to B., who pays the price. B., upon examina- tion, finds it not equal to sample ; B. afterwards uses two sacks, and sells one. He cannot now rescind the contract and recover the price, but he is entitled to compensation from A. for any loss caused by the breach of warranty. (c) B. makes two pairs of shoes for A. by A.'s order. When the shoes are delivered, they do not fit A. A. keeps both pairs for a day. He wears one pair for a short time in the house, and takes a long walk out of doors in the other pair. He may refuse to accept the first pair, but not the second. But he may recover compensation for any loss sustained by the defect of the second pair. 2. Where goods not ascertained at the time of contract. The matter of this section is well-settled law iu England. On a sale of goods not specific, the buyer may reject them if, upon examination within a reasonable time, he finds them not to be as warranted (c) ; but if he does not reject them, he may none the less rely on the breach of warranty as against the seller suing for the price (d), and set off his damages against the price as far as they go (e), or he may bring a distinct action for any damage sustained by reason of the breach of warranty, notwithstanding that he has already paid the full price (/). Where goods inferior to the quality contracted for have been delivered and accepted, the measure of the damages to which the buyer is entitled is the difference between what the goods delivered are worth on arrival and what they would have been worth if according to contract (g). Where the (c) E.g., Heilbutt v. Hickson (1872) goods quite worthless : Povlton v. Latti- L. R. 7 C. P. 438. . more (1829) 9 B. & C. 259, 32 R. R. 673. ( j n the same condition as il the contract had been performed. Where the plaintiff has waited until the time for completion has elapsed, and then brought his action, the measure of damages is the sum of the several items of damage sustained at eacli of the dates when a delivery should have been made under the contract (u). And this is so even if, by reason of the plaintiff electing to treat the defendant's refusal as an immediate breach (see s. 39, p. 215, above), the cause of action is complete I before the time fixed for performance has expired. "The election to take advantage of the repudiation of the contract goes only to the question of breach, and not to the question of damages." It will be ground for mitiga- tion of damages, however, if the defendant can show that the plaintiff might have diminished his loss by going into the market on the day of breach and making a forward contract ajt the then market price (a?). It is no ground for mitigation that the buyer after he has repudiated the contract discovers that the goods tendered were not in accordance with the descrip- tion contained in the contract (y}. The damages are to be calculated with reference to the date of breach only where no time was fixed for acceptance (2) ; for then there is no other measure possible. 121. When goods sold have been delivered to the buyer, the seller is not entitled to rescind the Right of seller as to rescission on contract on the buyer's failing to pay the failure of buyer to t J . ' 7 p.-iy price at time price at the time fixed unless it was stipulated by the contract that he should be so entitled. {Martindale v. Smith (1841) 1 Q. B. 389 ; 55 E. R. 285. The seller's lien on the goods while they remain in his possession is of course unaffected by this rule.] If, however, the contract has been induced by fraud, the seller on receiving notice of the fraud may disaffirm the contract and retake possession of goods which have been delivered under the contract (a). But where the vendor has been induced to enter into the contract by an innocent misrepre- sentation, the Court will not grant rescission after the contract has been executed (b). (u) Brown v. Muller (1872) L. R. 7 Ex. (z) Sale of Goods Act, s. 50 (3). We 319, 324. cannot find any judicial authority, but it (x) Roper v. Johnson (1873) L. R. 8 is obvious common sense. C. P. 167, 180, 183. 00 Re Eastgate, Ex parte Ward (y) Braithwaite v. Foreign Hardwood [1905] 1 K. B. 465. Co. [1905] 2 K. B. 543. (b) Seddon v. North Eastern Salt Co. SALE BY AUCTION. 437 122. Where goods are sold by auction, there is a Ss. 122 123 distinct and separate sale of the goods in each Sale and transfer of lots sold by lot, by which the ownership thereof is trans- auction. ierred as each lot is knocked down. This is so in England even if there is a condition of sale that goods are not to be removed before payment. Such a condition does not prevent the buyer to whom a lot has been knocked down from reselling the goods forthwith (c). The rule itself is well settled (d). It might, no doubt, be excluded by clear evidence of a contrary intention, and the more guarded language of the English Sale of Goods Act provides for this. As to the speculative doctrine, for which there is some English authority (e), that, where a sale by auction is announced to be without reserve, a preliminary contract arises between the vendor and the highest bidder that the latter shall be the purchaser, see p. 46, above. Unless a right to bid is expressly reserved to the seller, neither he nor any one on his behalf may bid, and the a\ictioneer may not knowingly receive such a bid. Any sale contravening this rule may be treated as fraudulent by the buyer (/). An auctioneer has ostensible authority to sell without reserve, and if, after a bid is accepted, the seller sets up a restriction of the auctioneer's authority which was not disclosed at the time, the buyer's remedy is not against the auctioneer for breach of warranty of authority, but against the seller on the contract of sale (g). Effect of use by 123. If, at a sale by auction, the seller S[ng f sto e rai ed makes use of pretended biddings to raise the price< price, the sale is voidable at the option of the buyer. This reproduces the Common Law (A). Formerly there was a different rule in equity as to sales of land, though its extent was not perfectly settled. In 1867 the rule of equity was practically assimilated by statute [1905] 1 Ch. 326 ; but former decisions of Goods Act, s. 58 (1). are not uniform and the point is not (e) See Johnston v. Boyes [1899] 2 Ch thoroughly settled. 73. (c) Scott v. England (1844) 2 D. & L. (/) Sale of Goods Act, 1893,8.58(3) (4). 520, 69 R. E. 868. (g~) Rainbow v. Hawkins [1904] 2 K. B. (t) See the Transfer of Property Act however, are too much implicated with IV of 1882, s. 49, as to the rights of a the special provisions of the English transferee of immovable property under Companies Acts to be generally iustruc- a fire policy. tive for the present purpose. 00 Ihtberts v. Crowe (1872) L. It. 7 ( Moule v. Garrett, Ex. Ch. (1872) C. P. 629, 637, per Willes, J. See also L. R. 7 Ex. 101, 104. Kelluclt v. Enthocen (1874; L. R. 9 Q. B. 440 THE INDIAN CONTRACT ACT. S. 125. such suit if, in bringing or defending it, he did not contra- vene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorised him to bring or defend the suit ; (3) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorised him to compromise the suit. Sub-s. 1. This section represents the English law, which is best summarised in the notes to Lampleigh v. Brathwait in Smith's Leading Cases (q). As to sub-s. 1, " it is obvious that when a person has . . . altered his position in any way on the faith of a contract of indemnity, and an action is brought against him for the matter against which he was indemnified, and a verdict of a jury obtained against him, it would be very hard indeed if when he came to claim the indemnity the person against whom he claimed it could fight the question over again, and run the chance of whether a second jury would take a different view and give an opposite verdict to the first. Therefore, by reason of that contract of indemnity, the judgment is conclusive," although the promisor was no party to it(r). Sub-s. 2. As to sub-s. 2, " in the case of contracts of indemnity, the liability of the party indemnified to a third person is not only contem- plated at the time of indemnity, but is the very moving cause of that contract ; and in cases of such a nature there is a series of authorities to the effect that costs reasonably incurred in resisting or reducing or ascertaining the claim may be recovered " (s). But the costs must be such as would have been incurred by a prudent man (t). The rule in England is settled to this effect ; it is applied, indeed, to the case of a man who has failed to perform his contract through breach of a sub-contract, if he sues the sub-contractor, although there is no agree- ment to indemnify the contractor, and the question is regarded as being of (?) Vol. I. 154, 155, llth ed. (1880) 5 Cal. 811. (r) Parker v. Lewis (1873) L. K. 10 Ch. (0 Gopal Singh v. Bhtncani Prasad 1035, 1059, per Mellish, L.J. (1888) 10 All. 531. (*) Pepin v. Chunder Seekur Mookerjee CONTRACT OF GUARANTEE. 441 the measure of damages only (). The costs recoverable, in a proper case, Ss. are not confined to the taxed costs (x). 125, 126. Sub-s. 3. As to sub-s. 3, " if a person has [expressly] agreed to indemnify another against a particular claim or particular demand, and an action is brought on that demand, he [the defendant] may then give notice to the person who has agreed to indemnify him to come in and defend the action, and if he does not come in, and refuses to come in, he may then compromise at once on the best terms he can, and then bring an action on the contract of indemnity " (y). Rights of promisor. This section deals with the rights of a pi-omisee in a contract of indemnity. There is no provision in the Act for the rights of a promisor in such a contract. The absence, however, of such a provision does not take away the rights which such a promisor has according to English law, and which are analogous to the rights of a surety declared in s. 141. Those rights constitute an essential part of the law of indemnity, and they are of general application, as they are based on natural equity (z). 126. A " contract of guarantee " is a contract to per- form, the promise, or discharge the liability, of " Contract of L .' J ' guarantee," a third person in case of his default. The " surety," " princi- t i pal debtor," and person who gives the guarantee is called the "creditor." . " surety ; the person in respect or whose default the guarantee is given is called the " principal debtor," and the person to whom the guarantee is given is called the " creditor." A guarantee may be either oral or written. The contract of guarantee supposes a principal debtor (a) ; the surety's obligation nmst be substantially dependent on a third person's default (>) A promise to be primarily and independently liable is not a guarantee, though it may be an indemnity (c). In England, however, the distinction (M) Hammond <$ Co.y.Bussey (1887) Fatesingjl v. The Secretary of State for 20 Q. B. Div. 79 ; Aglus % Co. v. Great India (1889) 14 Bom. 299, 303. Western Collier y Co. [1899] 1 Q. B. 413, (a) Mountste.phen v. Laltcman (1871) both in C. A., and see p. 308, above, on L. R. 7 Q. B. 196, 202, Ex. Ch., affirmed s. 73. in House of Lords, L. R. 7 H. L. 1 7. (a;) Howard v. Lovegrore (1870) L. R. (b) Harburg India Rubber Comb Co. 6 Ex. 43. v. Martin [1902] 1 K. B. 778, C. A. (y) Hellish, L.J., L. R. 8 Ch. at (c) Guild % Co. v. Conrad [1894] 2 p. 1059. Q. B. 885. (z) See Maharana Shrl Jasvatslngjl 442 THK INDIAN CONTRACT ACT. Ss. is material chiefly, if not wholly, because a guarantee is within the Statute 126, 127. of Frauds, and therefore not actionable without such a " memorandum or note " as is required by a. 4 of that Act ; whereas the present section expressly declares that an oral guarantee is not less valid than a written one. The mere transfer by a debtor of his property to a trustee for the benefit of his creditors, the trustee not undertaking any personal liability to the creditors, does not constitute the relation of principal and surety as between the debtor and the trustee (d). 127. Anything done, or any promise made, for the Consideration for benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee. Illustrations. (a) B. requests A. to sell and deliver to him goods on credit. A agrees to do so, provided C. will guarantee the payment of the price of the goods. 0. promises to guarantee the payment in consideration of A.'s promise to deliver the goods. This is a sufficient consideration for C.'s promise. (b) A. sells and delivers goods to B. 0. afterwards requests A. to forbear to sue B. for the debt for a year, and promises that, if he does so, 0. will pay for them in default of payment by B. A. agrees to forbear as requested. This is a sufficient consideration for C.'s promise. (c) A. sells and delivers goods to B. C. afterwards, without \ consideration, agrees to pay for them in default of B. The agreement is void. Consideration for a contract of guarantee. This is nothing but an application of the wider principle that in all cases of contract the really necessary element of consideration is the legal detriment incurred by the promisee at the promisor's request, and it is immaterial whether there is or is not any apparent benefit to the promisor (see p. 161, above). Like any other contract, a contract of suretyship may be invalidated by total failure of the consideration, as where the consideration for an intended guarantee was postponing the sale of the debtor's goods, but the creditor was unable to stop the sale for want of the consent of other necessary parties (e), or where the consideration was withdrawal of a 00 Arunachellant Cliettl v. Sulra- 00 Cooper v. Joel (1859) 1 D. F. & J. manian Chetti (1907) 30 Mad. 235. 240. GUARANTEE. 443 criminal prosecution against the debtor, but the Court would not sanction Ss. the withdrawal, the offence being nou-compoundable (/). 12T, 128. Where A. advanced money to B. on a bond hypothecating B.'s property, and mentioning C. as surety for any balance that might remain due after realisation of B.'s property, and C. was no party to the bond, but signed a separate surety bond two days subsequent to the advance of the money, it was held that the subsequent surety bond was void for want of consideration (y). In this case it was said that Illustration (c) could be good law only on the assumption that there was no privity between C. and B., and that C. acted merely as a volunteer (h) but this appears to be exactly what the illustration says. This section does not, of course, exclude the possibility of other kinds of consideration. However, lending money or supplying goods to the principal debtor and forbearing to sue him (i) are by far the commonest forms of consideration for a surety's contract. In India forbearance to execute a decree against the debtor is also a common form (&). 128. The liability of the surety is co-extensive with that of the principal debtor, unless it is other- surety's liability. . --1-11,1 wise provided by the contract. Illustration. A. guarantees to B. the payment of a bill of exchange by C., the acceptor. The bill is dishonoured by 0. A. is liable, not only for the amount of the bill, but also for any interest and charges which may have become due on it. [AcJcermann v. Ehrmsperger (1846) 16 M. & W. 99 : "I entertain no doubt that a party who guarantees the payment of a bill is liable for all that the principal would be liable for," per Pollock, O.B., at p. 103.] Additional Illustration. [A. guarantees to B. the payment of rent becoming due from B. to C. B. fails to pay the rent. A. is liable for the rent, but not for interest on the rent, unless tlie bond contained some such words as " with interest thereon" : Maharaja of Benares v. Har Narain Singh (1906) 28 All. 25.] Proof of surety's liability. The liability must be proved against the surety in the same way as against the principal debtor. A judgment or (/) llet Ham v. Debi Prasad (1881) 1 in general, which even suggests that the All. VV. N. 2. illustrations are not authoritative. ( continuing guarantee, and accordingly he is not liable for the price of 129, 130. the four sacks. [Kay v. Groves (1829) 6 Bing. 276.] Continuing guarantee. Whether in a particular case a guarantee is continuing or not is a question of the intention of the parties, " as expressed by the language they have employed, understanding it fairly in the sense in which it is used ; and this intention is best ascertained by looking to the relative position of the parties at the time the instrument is written " (y). Surrounding circumstances must be looked to " to see what was the subject-matter which the parties had in their contemplation when the guarantee was given "(z). A guarantee in this form: "I, M., will be answerable for 50 sterling that Y., butcher, may buy of H.," was held to be a continuing guarantee to the extent of 50 when it appeared from the circumstances that the parties contemplated a continuing supply of stock to Y. in the way of his trade. The Court has power "not to alter the language, but to fill up the instrument where it is silent, and to apply it to the subject-matter to which the parties intended it to be applied " (a). In construing the language of the parties the whole of their expressions must be looked to, not merely the operative words. Thus the following words were held to show that a guarantee, which otherwise might have been confined to a single transaction, was intended to be continuing : " Having every confidence in him, he has but to call upon us for a cheque and have it with pleasure for any account he may have with you ; and when to the contrary we will write you " (6). B. became surety under bond to Government for the treasurer of a collectorate. The collector yearly examined the accounts and struck a balance which he certified to be correct. B. on each occasion executed a new bond, but the old bonds were not cancelled or given up. On subsequent inquiry, the treasurer was discovered to have embezzled moneys during each year. It was held that, on such discoveries being made, B. was still liable under the old bonds, there having been no novation (c). 130. A continuing guarantee may at any time be Revocation of revoked by the surety, as to future transac- tions, by notice to the creditor. (y) Bovill, C.J., Coles v. Pack (1869) (J) Nottingham Hide Co. v. Bottrill L. R. 5 C. P. 65, 70. (1873) L. R. 8 C. P. 694. (z) Willes, J., Heffield v. Meadows (c) Lala Banshidhar v. Government of (1869) L. R. 4 C. P. 595, 599. Bengal (1872) 9 B. L. R. 364, 14 M. I. A. (a) lb., and per Montague Smith, J., at 86. p. 601. 448 THE INDIAN CONTRACT ACT. Illustrations. (a) A., iii consideration of B.'s discounting, at A.'s request, bills of exchange for C., guarantees to B., for twelve mouths, the due pay- ment of all such bills to the extent of 5,000 rupees. B. discounts bills for C. to the extent of 2,000 rupees. Afterwards, at the end of three months, A. revokes the guarantee. This revocation discharges A. from all liability to B. for any subsequent discount. But A. is liable to B. for the 2,000 rupees on default of C. (b) A. guarantees to B., to the extent of 10,000 rupees, that C. shall pay all the bills that B. shall draw upon him. B. draws upon C. C. accepts the bill. A. gives notice of revocation. C. dishonours the bill at maturity. A. is liable upon his guarantee. Future transactions. The words " future transactions " must be taken to imply that the operation of this section is confined to cases where a series of distinct and separate transactions is contemplated. It is otherwise in the case of an entire consideration. " Where a continuing relationship is constituted on the faith of a guarantee . . . the guarantee cannot be annulled during the continuance of that relationship " ; and as the surety could not determine it himself by notice, so his death does not relieve his estate from liability ; the nature of the transaction implies a contract to the contrary under s. 131. The father of a person admitted as an underwriting member of Lloyd's (a position from which he could not be removed except for certain causes specified in the rules of the association) gave a guarantee to Lloyd's " for all his engagements in that capacity " ; it was held that the guarantee was not confined to transac- tions within the society, that it was not revocable while the son continued to be an underwriting member, and that the guarantor's death did not revoke it (d). But a material change in what we may call the guaranteed situation may justify a revocation. Thus, in the common case of a continuing guarantee for a servant's honesty, proved dishonesty on the servant's part entitles the surety to say : " After this you must employ such a man, if you will, at your own peril " (e). Illustration (a) was evidently founded on the case, fairly recent at the 00 Lloyd's*. Harper (1880) 16 Ch. Div. L. R. 13 Eq. 450, 458 ; but this is not the (Fry, J.) (see his statement of the principle only ground for the decision. See s. 139, at p. 306, quoted above), and C. A. p. 467, below. The last-mentioned case' 00 Phillips v. Foxall (1872) L. R. 7 turning as it does partly on the peculiar Q. B. 666, 677, 681, following on this rules as to instruments under seal, is not in point a dictum in Burgess v. JSre (1872) itself of much value for Indian purposes. REVOCATION OF CONTINUING GUARANTEE. 449 time, of 0/ord v. Davies (/). The truth is, as the judgment of the Court S. 130. explains, that A.'s guarantee is in such circumstances nothing but an offer until B. has acted upon it by discounting a bill ; for, if B. does not promise to discount C.'s bills, there is no immediate legal detriment to B. When B. does discount a bill, A.'s offer becomes a promise to that extent, and so from time to time. The standing offer is, therefore, revocable by A. at any time. " This promise by itself creates no obligation. It is in effect conditioned to be binding if the plaintiff acts upon it, either to the benefit of the defendants, or to the detriment of himself. But, until the condition has been at least in part fulfilled, the defendants have the power of revoking it. ... We consider each discount as a separate transac- tion, creating a liability on the defendant till it is repaid, and, after repayment, leaving the promise to have the same operation that it had before any discount was made, and no more." Accordingly we have here to do not with any peculiar feature in the relations of principal and surety, but with, an application of the general common law doctrine of consideration. Notice. The mere denial of liability by the surety in a previous suit instituted by the creditor against him and the principal does not operate as a notice inider this section (g). Sureties for Guardians and Administrators. It has been held by the High Court of Bombay (A) that this section does not apply to a surety bond required by the Court on the appointment of a guardian of the property of a minor. The surety in that case applied to the Court to be released from his obligation as such on account of the guardian's mal- administration of the minor's estate, but the Court refused the application, stating that "the very object of requiring such security was to guarantee the minor against such misconduct or mismanagement on the part of the guardian." The Calcutta High Court, however, has held that this section applies to a surety bond passed under the Probate and Administration Act V of 1881, and that a surety for the administrator of an estate can as to future transactions, by giving notice, be released from his obligation as surety on account of maladministration of the estate by the adminis- trator (i). As to the Bombay case it was said that, though it was similar in principle, the surety there had a remedy inasmuch as he might have applied to the Court as the next friend of the minor for the discharge of the guardian, while in the Calcutta case the surety was absolutely without (/) (1862) 12 C. B. N. S. 748, Finch, Bom. 418. Sel. Ca. 87 ; and see the judgment of (A) Bai Somi v. Chokshl Ishvardas Baggallay, L.J., in Morrell v. Cowan (1894) 19 Bom. 245. (1877) 7 Ch. Div. 151, 154. (0 Raj Narain v. Fid Kiunarl DeU (g) JBIiikabhai v. Sai Shuri (1903) 27 (1901) 29 Cal. 68. T.C. 29 46C THE INDIAN CONTRACT ACT. Ss. a remedy, for, being neither a legatee nor a creditor, he could not take any 130, 131. steps to protect either the estate or himself by instituting administration proceedings. On the other hand it has been recently held by the Madras High Court, following the principle of the Bombay decision, that this section does not apply to surety bonds passed under the Probate and Administration Act. " If the section applies, the ' creditor ' would pre- sumably be the obligee under the bond, i.e., the Judge or Registrar, and the surety could, without any action or any other legal proceeding, put an end to his liability by giving notice to the Judge or Registrar. This is contrary to established practice and might lead to great inconvenience " (&). 131. The death of the surety operates, in the absence Revocation of ^ an 7 contract to the contrary, as a revoca- gualSeV tion of a continuing guarantee, so far as surety's death. regards future transactions. " Contract to the contrary." The English rule appears to be that where there is a guaranteed subject to revocation by notice, and the surety dies without having revoked it, notice of his death to the creditor (or at all events of his death leaving a will) operates as a revocation (I], An express provision that a guarantor or his representatives may determine the guarantee by notice is an example of such a contract to the contrary as this section contemplates ; in such a case mere notice of the death will not be enough (m). It is by no means clear that the present section states the rule rather than an exception; at any rate, the "contract to the contrary " need not be in express terms. Where A. guaranteed payment of rent to a lessor, and B. in turn promised A. to be responsible for all rent that might not be paid by the lessee, and which he might under his guarantee become liable to pay, it was held that, assuming that the latter transaction was a continuing (&) Subroya Chetty v. Ragammall Q. B. D. 42, judgment on further con- (1905) 28 Mad. 161, relying principally sideration by Bowen, J. See, however, on Re Stark (1866) L. R. 1 P. & D. 76, [1895] 1 Ch. at p. 577, and per Cotton. L.J., to which it was observed the attention of Beckett v. Addyman (1882) 9 Q. B. Div. the Calcutta Court was not drawn. In 783, 792. the Calcutta case the surety proceeded by (/) Re Silvester [1895] 1 Ch. 573. For an application in the probate proceedings, earlier and more or less conflicting and in the Madras case by a regular suit. authorities in courts of law and equity The Madras Court said that the surety see Bradbury v. Morgan, 1 H. & C. 249 ; was not entitled to relief in either case. Harriss v. I'awcett, L. R. 8 Ch. 866. (0 Covlthart v. Clementson (1879) 5 SURETYSHIP BETWEEN CO-DEBTORS. 451 guarantee, it was not revoked by B.'s death, and that B.'s representative Ss. was liable to A. for rent paid by A. to the lessor after B.'s death on failure 131, 133. of the lessee to pay the same (n). Compare s. 208, p. 550, below, as to the determination of an agent's authority. 132. Where two persons contract with a third person to undertake a certain liability, and also con- Liability of two persons, primarily tract with each other that one of them shall liable, not affected TIT by arrangement be liable only on the default of the other, the between them that . . one shall be surety third person not being a party to such con- on other's default. , ,. , .,. , . tract, the liability or each of such two persons to the third person under the first contract is not affected by the existence of the second contract, although such third person may have been aware of its existence. Illustration. A. and B. make a joint and several promissory note to C. A. makes it in fact as surety for B., and 0. knows this at the time when the note is made. The fact that A., to the knowledge of 0., made the note as surety for B. is no answer to a suit by C. against A. upon the note. Joint debtors and suretyship. This rule is elementary so far as it goes ; but it is material to observe that it does not extend beyond its literal terms. Where one of two joint debtors is, to the knowledge of the creditor, in fact a surety for the other as between themselves, his immediate liability to the creditor is not qualified, but he is entitled to the rights of a surety under the following sections : 133, 134, 135. " When two or more persons bound as full debtors arrange, either at the time when the debt was contracted or subsequently, that, inter se, one of them shall only be liable as a surety, the creditor after he has notice of the arrangement must do nothing to prejudice the interests of the surety in any question with his co-debtors. That appears to me to be the law as settled by the judgments of this House in Oakeley v. Pasheller (o) and Overend, Gurney & Co. v. Oriental Financial Corporation " (p). (n) Gopal Singh v. Bhawani Prasad [1894] A. C. 586, 598. In Swire v. (1888) 10 All. 531. Redman (1876) 1 Q. B. D.536, Oakeley v. (o) (1836) 4 01. & F. 207, 42 R. R. 1. Pasheller was not rightly understood. Q;) (1874) L. R. 7 H. L. 348 ; per Lord See per Lord Herschell, [1894] A. C. at Watson, Rouse v. Bradford Banking Co. p. 591. 292 452 THE INDIAN CONTRACT ACT. Ss. There need not be any assent by the creditor, much less a new 132, 133. agreement to accept the secondary debtor in the relation of surety (q). It is equally settled in Indian Courts that in a case within this section if the creditor, with knowledge of the contract between the co-debtors, does any of the acts specified in ss. 133, 134, or 135, the legal consequence of which is the discharge of the surety, the debtor, who is in fact a surety, will thereby be discharged from liability (r). The provisions of this section do not apply where the liability under- taken is not the same. A party who accepts bills of exchange for the accommodation of another is not precluded by this section from pleading that he was an accommodation acceptor only. The liability undertaken by the acceptor and drawer of a bill is in no sense a joint liability, and though they each contract to pay the same sum of money, they contract severally in different ways, and subject to different conditions (s). 133. Any variance, made without the surety's con- sent, in the terms of the contract between Discharge of .., ,, -. TI surety by variance the principal and the creditor, discharges in terms of contract. . the surety as to transactions subsequent to the variance. Illustrations. (a) A. becomes surety to C. for B.'s conduct as a manager in C.'s bank. Afterwards, B. and 0. contract, without A.'s consent, that B.'s salary shall be raised, and that he shall become b'able for one-fourth of the losses on overdrafts. B. allows a customer to overdraw, and the bank loses a sum of money. A. is discharged from his suretyship by the variance made without his consent, and is not liable to make good this loss. \_Bonar v. Macdonald (1850) 3 H. L. C. 226 ; 88 E. E. 60.] (b) A. guarantees 0. against the misconduct of B. in an office to which B. is appointed by C. and of which the duties are defined by an Act of the Legislature. By a subsequent Act the nature of the office is materially altered. Afterwards, B. misconducts himself. A. is dis- charged by the change from future liability under his guarantee, though the misconduct of B. is in respect of a duty not affected by the later Act. \_0sivald v. Mayor of Berwick (1856) 5 H. L. C. 856 (the rule of law was undisputed, and the only question considered was whether there had been a material alteration in the office) ; Pybus v. Gibb (1856) 6 E. & B. 902, 911, also treating the rule as settled.] (?) Wythes v. Labouchere (1858) 3 De (*) Pogose v. Bank of Bengal (1877) 3 G. & J. 593, 599. Cal. 1 74, 184. Cp. Orerend, Gurney $ Co. (r) See Punchanun Gliose v. Daly v. Oriental Financial Coloration, L. K. (1875) 15 B. L. E. 331 ; Harjiban Day v. 7 H. L. 348. Shagwan Das (1871) 7 B. L, K 535. DISCHARGE OF SURETY. 453 (c) C. agrees to appoint B. as his clerk to sell goods at a yearly g. 133. salary, upon A.'s becoming surety to C. for B.'s duly accounting for moneys received by him as such clerk. Afterwards, without A.'s knowledge or consent, C. and B. agree that B. should be paid by a commission on the goods sold by him, and not by a fixed salary. A. is not liable for subsequent misconduct of B. (d) A. gives to C. a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C. to B. on credit. Afterwards B. becomes embarrassed, and, without the knowledge of A., B. and 0. contract that C. shall continue to supply B. with oil for ready money, and that the payment shall be applied to the then existing debts between B. and 0. A. is not liable on his guarantee for any goods supplied after this new arrangement. (e) C. contracts to lend B. 5,000 rupees on the 1st March. A. guarantees repayment. C. pays the 5,000 rupees to B. on the 1st January. A. is discharged from his liability, as the contract has been varied, inasmuch as 0. might sue B. for the money before the 1st of March. [Bonser v. Cox (1841-4) 4 Beav. 379; 6 Beav. 110; 55 R. E. 113.] Variation of contract between creditor and principal. This is a rule of long standing, thus expressed more than half a century ago by Lord Cottenham : "Any variance in the agreement to which the surety has subscribed, which is made without the surety's knowledge or consent, which may prejudice him, or which may amount to a substitution of a new agree- ment for a former agreement, even though the original agreement may, notwithstanding such variance, be substantially performed, will discharge the surety " (<). Again, it was laid down a generation later by the Judicial Committee : "A long series of cases has decided that a surety is discharged by the creditor dealing with the principal or with a co-surety in a manner at variance with the contract the performance of which the surety had guaranteed " (u). Moreover, as the case now cited shows, the more special provisions of the two following sections are deductions from the same principle. " The party who is surety for another for the performance of an engagement can only be called upon to guarantee the performance of that engagement when the engagement is carried into complete, literal, and strict effect. . . . He enters into a particular and specific contract, and that contract alone he is bound to perform " (x). The only qualification (for it is not an exception) to the generality of the rule is that, where a guarantee is for the performance of several and (0 3 H. L. C. at pp. 238, 239. The law Zealand, (1883) 8 App. Ca. 755, 763. is the same in Scotland : ib. O) Lord Lyndhurst, L.C., Bonser v. (M) Ward v. National Bunlt, of New Cox (1844) 13 L. J. Ch. 260, 55 E. B. 120. 454 THE INDIAN CONTRACT ACT. S. 133. distinct contracts or duties, a change in one of those contracts or duties will not affect the surety's liability as to the rest(y). A somewhat peculiar case is the following : N. owed 3,400 to P., and was about to dispose of his business to a company to be formed. It was agreed between N. and P. that N. should pay off the debt within a time named, and in the meantime transfer to P. shares in the company of the nominal value of 6,000, and redeem them at par within twelve months ; and (among other terms) N.'s book debts should be collected by one V. and divided equally between P. and a certain other creditor, P.'s share to be applied towards redemption of the shares above mentioned. E. guaranteed the redemption of the shares. Some months later P. released his interest in the book debts to N. Later N. failed to deliver the shares, as promised. This was a variance from the original contract which discharged E., the surety. " The surety at the time he entered into the suretyship had a right to have these book debts appropriated to reduce the principal debt, and that right he has been deprived of by the act of the creditor in releasing the book debts." " The surety is entitled to remain in the position in which he was at the time when the contract was entered into "(2). Attempts have been made to confine the rule to the cases where the variance materially affects the surety's interest, and to treat it as a question in each case whether the change is material for this purpose. Only one reported case appears to countenance this view (a), and it is clearly inconsistent with later and higher authority. There may be " cases where it is without inquiry evident that the alteration is unsub- stantial, or that it cannot be otherwise than beneficial to the surety," and in such cases " the surety may not be discharged " ; but " if it is not self- evident that the alteration is unsubstantial, or one which cannot be pre- judicial to the surety, the Court will not, in an action against the surety, go into an inquiry as to the effect of the alteration, or allow the question whether the surety is discharged or not to be determined by the finding of a jury as to the materiality of the alteration or on the question whether it is to the prejudice of the surety, but will hold that in such a case the surety himself must be the sole judge whether or not he will consent to remain (y) Skillett v. Fletcher (1866-7) L. K. doubted its wisdom (p. 674), but admitted 1 C. P. 217, 2 C. P. 469 ; Croydon Gas Co. that it was beyond discussion. The C. A. v. Dickinson (1876) 2 C. P. Div. 46. affirmed the decision of the Q. B. D. for (z) Polalt v. Everett (1876) 1 Q. B. Div. the same reasons without delivering any 669, per Blackburn, J., at p. 774 (where formal judgment (p. 678). the words "to the person collecting them" () Sanderson v. Aston (1873) L. R. 8 seem to be a slip), per Mellor, J., at p. 677. Ex. 73, judgment on second plea. Lord Blackburn disliked the rule and DISCHARGE OF SURETY. 456 liable notwithstanding the alteration, and that if he has not so consented S. 133. he will be discharged " (b). Accordingly we can see no ground for the suggestion that the present section goes beyond English law. Where by the terms of a consent decree for the payment by instal- ments of a sum of money with interest passed against certain defendants as principal debtors, and against other defendants as sureties, it was stipu- lated that on' default of payment of any one instalment the decree-holder should sell the properties of the principal debtors for the whole amount remaining due under the decree, and the liability of the sureties was limited to the deficiency, it was held by the Judicial Committee that the omission of the decree-holder to sell the properties until after several years after the first order for sale for the purpose of increasing the interest pay- able to him under the decree discharged the sureties to the extent of the interest that had accrued due after the date of that order (c). The judgment proceeded on the ground that the conduct of the decree-holder in delaying the sale had the result of " laying an additional burden upon the sureties." A. becomes surety to C. for payment of rent by B. under a lease. Afterwards B. and C. contract, without A.'s consent, that B. will pay rent at a higher rate. A. is discharged from his suretyship in respect of arrears of rent accruing subsequent to such variance (d). A. owes Rs. 1,300 to B. C. afterwards requests B. to forbear to sue A. for a week, and deposits Rs. 1,300 with B. as a security. B. agrees to forbear as requested. A. fails to pay within the week. B. afterwards obtains from A. a promissory note payable on demand for Rs. 1,800. C. is discharged from the suretyship, and is entitled to recover back his deposit from B (e). A., an agriculturist within the meaning of the Dekkhan Agriculturists' Relief Act XVII of 1879, guaranteed to C. the payment by B., a non- agriculturist, of the amount of a bond payable by B. on demand. Under the Limitation Act XV of 1877, Sched. II. art. 59, the period of limitation on such a bond is three years from the date of the bond. By a subsequent (V) Holme v. Brunslrill (1878) 3 Q. B. collateral to be due by the tenant, e.g., Div. 495, 505, per Cotton and Thesiger, redelivery of farm stock in good condi- L.JJ., followed JBolton v. Salmon [1891] tion at the end of the term, a variation of 2 Ch. 48, 54. the terms of the tenancy may discharge (c) Itamanund v. Chowdliry Soonder the surety even though it actually Narain (1878) 4 Cal. 331. diminishes the rent payable : Holme v. ( the principal debtor, discharges the surety, principal debtor. unlesg the gurety assents to suc h contract. GO (1902) 24 All. 504, 506. Bom. 697, and the English cases cited (K) See Kashiba v. Shripat (1894) 19 there. DISCHARGE OF SURETY BY GIVING TIME TO PRINCIPAL. 463 Contract to give time to principal debtor. The leading English S. 135. cases have already been cited under the preceding section. The earliest decision, one commonly referred to in modern books, dates from 1795 (i). The general principle was thus stated : " It is the clearest and most evident equity not to carry on any transaction without the privity of him who must necessarily have a concern in any transaction with the principal debtor. You cannot keep him bound and transact his affairs (for they are as much his as your own) without consulting him." A nominal giving of time may have the effect, in substance, of accelerating the creditor's remedy, as where, having commenced an action against the principal debtor, the creditor took a recorded acknowledgment of the debt and undertook not to enforce it before a certain day, which, however, was earlier than the time at which he could have obtained judg- ment in the action in the ordinary course. In such a case the surety, being manifestly not prejudiced, is not discharged (&). A contract whereby the creditor promises to give time to the principal debtor must be distinguished from an unconditional contract not to sue him. In the former case, the remedy of the creditor is merely suspended until the determination of the fixed period ; in the latter case, the principal debtor is completely released from his obligation so as to entitle the surety to a discharge under s. 134, apart from the specific provisions of this section. In either case, the mere formation of the contract is sufficient to operate as a discharge of the surety irrespective of any forbearance that may be exercised under it. The reason of this rule appears to be that a surety has a right, immediately on the debt becoming due, to insist upon proceedings being at once taken by the creditor against the principal debtor, and any contract that would prevent the creditor from suing him would be inconsistent with that right (s. 139) (I). But the contract must be a binding one supported by consideration ; forbearance to sue, therefore, exercised in pursuance of an agreement without consideration, would not discharge the surety, as it does not amount to anything more than " mere forbearance " within the meaning of s. 137(m). It is not necessary that the contract should be express : a tacit or implied contract inferred from the acts of the parties is equally binding as an express one. Thus the acceptance of interest in advance by a creditor operates as a general rule as (0 Rees v. Berrington, 2 Ves. Jr. 540, 3 preference : Petty v. Coohe (1871) L. R. 6 R. R. 3 (Lord Loughborough). Q. B. 790. (&) Hulme v. Coles (1827)2 Sim. 12, (I) See Protab Chunder v. Gour Chunder 29 R. R. 52. Similarly the surety is not (1878) 4 Cal. 132, 134. discharged by the creditor's innocent (ni) Damodar Das v. Muhammad acceptance from the principal debtor of a Husain (1900) 22 All. 351. payment which is in fact a fraudulent 464 THE INDIAN CONTRACT ACT. Ss. an agreement, to give time to the principal debtor and consequently as a 135, 136. discharge to the surety; for the creditor is in that event precluded from suing the principal until the time covered by the payment in advance has expired (n). But the surety will not be discharged if he consents to the contract. Such consent may be a general one, and it has been held by the Judicial Committee that a stipulation between a creditor, principal debtor, and a surety that the surety should not be released by any dealings between the creditor and the principal debtor, followed by a contract to give time to the principal debtor, does not discharge the surety (o). Contrary agreement. The operation of the rule as to giving time to the principal debtor may be excluded by express agreement. If the instru- ment creating the debt and the suretyship declares that the surety or sureties shall be taken, as between themselves and the creditor, to be principal debtors, and shall not be released by reason of time being given, or of any other forbearance, act, or omission of the creditor which, but for this provision, would discharge the sureties, then any defence on these grounds is effectually barred, and it is unnecessary to consider whether the facts would otherwise raise it (p). surety not dis- 136. Where a contract to give time to the principal debtor is made by the creditor >thneto t0 W ^k a third person, and not with the principal principal debtor, debtor, the surety is not discharged. Illustration. C., the holder of an overdue bill of exchange drawn by A. as surety for B., and accepted by B., contracts with M. to give time to B. A. is not discharged. " It is clear that when the creditor enters into a binding contract with the principal debtor to give him time without the assent of the sureties, and without reserving his remedy against the sureties, such giving of time discharges the sureties. . . . But, to produce this result, two things are necessary. There must be a binding contract to give time, capable of being enforced ; and the contract must be with the principal (n) Kail Prasanna v. Ambica Cliaran B. L. R. 331, and the observations of (1872) 9 B. L. R. 261 ; Protab Ckunder v. Phear, J., at p. 338. Gour Chunder, supra; Gourchandra v. (V) Hodges v. Delhi and London Sank, Protapchandra (1880) 6 Cal.241, where it Ltd. (1900) 23 All. 137, 147; L. R. 27 was found that the surety consented to Ind. Ap. 168. advance interest being taken. See also (j) Greenwood v. Francis [1899] 1 Pvnchanun GJicsf y. Daly (1875) 15 Q. B. 312, C. A. FORBEARANCE TO SUE PRINCIPAL DEBTOR. 465 debtor. If merely made with a third party it will not do, as was decided Ss. in Frazer v. Jordan ( Krishnarav (1881) 5 (*) Oriental Financial Corporation v. Bom. 647, 651. i.e. 80 466 THE INDIAN CONTRACT ACT. Ss. being three years, and the forbearance exercised only for a year. The 137, 138. surety is not discharged in such a case, and it is equally clear that he would uot be discharged even if the forbearance continued for a longer period, provided it fell short of the period of limitation. In the latter case, how- ever, where the forbearance to sue continues until the creditor's remedy against the principal debtor is barred by limitation, it has been held by the High Court of Allahabad (it) that the surety is discharged. According to that Court, " the meaning of ' mere forbearance ' in s. 137 is such for- bearance, the legal consequence of which is not to discharge the principal debtor, but merely forbearance to sue immediately the debt becomes due, or for a limited time thereafter, as indeed is exemplified by the illustration to the section " (x). On the other hand, it has been held by the High Courts of Bombay and Calcutta (y) that the omission to sue within the period of limitation, when not arising from a contract, does not discharge the surety, and that " mere forbearance " in this section " means a forbearance not resting upon or in consequence of such a promise to give time to, or uot to sue, the principal debtor, as is the subject of s. 135" (2). The view taken by the Allahabad High Court appears to be the correct one (see notes to s. 134, p. 459, above). Forbearance to sue the principal debtor iu pursuance of an agreement not amounting to a contract, being without considera- tion, comes within the provisions of this section, and not s. 135 (a). 138. Where there are co-sureties, a release by the creditor of one of them does not discharge Release of one . . , co-surety does not the others ; neither does it tree the surety discharge others. , i i -I-TJ xi so released from his responsibility to the other sureties. Release of one of several sureties. This section is a necessary con- sequence of the principle laid down in s. 44, and must be taken as a deliberate extension of a rule which in the common law is limited to the case of co-sureties contracting severally and not jointly. Only where co- sureties have contracted jointly that is, where the joint suretyship of the others was part of the consideration for the contract of each does a release O) Radha v. Kinloclt (1889) 11 All. Radha Romun (1885) 12 Cal. 330. The 310 ; Ranjit Singh v. Naulat (1902) 24 Punjab Chief Court has held to the same All. 504. See also Hazarl v. Chunni Lai effect : Morice v. Simla Sank Corporation, (1886) 8 All. 259. Ltd. (1878) Punj. Rec. no. 2. (a?) Ranjit Singh v. Naubat, supra. (z) Hajarimal T. Krishnarav, 5 Bom. (y~) Hajarimal v. Krishnarav (1881) p. 651. 5 Bom. 647; Sankana v. Virupakshapa (a) Damodar Dasv. Muhammad Husain (1883) 7 Bom. 146 ; Krishto Kinhori v. (1900) 22 All. 351. ACT OR OMISSION IMPAIRING SURETY'S REMEDY. 467 of one of them by the creditor discharge the others (6). " The release of a gs. surety discharges a joint co-surety, but not a surety severally bound "(c). 138, 139. The present section appears to abolish this distinction. 139. If the creditor does any act which is inconsistent with the rights of the surety, or omits to do Discharge of surety by creditor's any act which his duty to the surety requires act or omission impairing surety's him to do, and the eventual remedy of the eventual remedy. * i surety himself against the principal debtor is thereby impaired, the surety is discharged (d). Illustrations. (a) B. contracts to build a ship for C. for a given sum, to be paid by instalments as the work reaches certain stages. A. becomes surety to C. for B.'s due performance of the contract. C., without the know- ledge of A., prepays to B. the last two instalments. A. is discharged by this prepayment. [Culvert v. London Dock Co. (1837) 2 Keen, 638, 4-i E. E. 300, with immaterial variation of faats.] (b) 0. lends money to B. on the security of a joint and several promissory note made in O.'s favour by B., and by A., as surety for B., together with a bill of sale of B.'s furniture, which gives power to C. to sell the furniture, and apply the proceeds in discharge of the note. Subsequently 0. sells the furniture, but, owing to his mis- conduct and wilful negligence, only a small price is realised. A. is discharged from liability on the note. [Perhaps suggested by Watson v. AllcocJc (1853) 4 D. M. G. 242, where the creditor by negligence lost the benefit of an additional remedy against the principal debtor.] (c) A. puts M. as apprentice to B., and gives a guarantee to B. for M.'s fidelity. B. promises on his part that he will, at least once a month, see M. make up the cash. B. omits to see this done, as promised, and M. embezzles. A. is not liable to B. on his guarantee. Act or omission of creditor tending to impair surety's remedy. The language of this section appears to be derived from a statement of the law in Story's Equity Jurisprudence, s. 325, adopted by the Court of Exchequer in 1860 (e). (V) Ward v. National Saiik of New (1877) 5 Ch. Div. 46. Zealand (1883) 8 App. Ca. 755, 764, 765. (d) Op, s. 133, p. 452, above. A certain There is some apparent conflict in earlier number of cases may equally well be con- English authorities ; it would be useless sidered as falling within either section, to discuss this he (e) Watts v. Shuttlswortli, 5 H. & N. (c) Leake, 659. Cp. Ex parte Good 235, 7 H. & N. 353. 302 468 THE INDIAN CONTRACT ACT. S. 139. Observe that the injurious quality to be considered is tendency to diminish the surety's remedy or increase his liability. Transactions having an immediate tendency to cause or permit the principal debtor to make default are only one species of those to which the surety may object. " In almost every case where the surety has been released, either in consequence of time being given to the principal debtor, or of a compromise being made with him, it has been contended that what was done was beneficial to the surety, and the answer has always been, that the surety himself was the proper judge of that, and that no arrangement different from that con- tained in his contract is to be forced upon him ; and bearing in mind that the surety, if he pays the debt, ought to have the benefit of all the securities possessed by the creditor, the question always is whether what has been done lessens that security " (/). But mere passive acquiescence by the creditor in irregularities on the part of the principal debtor, such as laxity in the time and manner of rendering accounts by a collector of public moneys whose fidelity is guaranteed, will not of itself discharge the surety () See 2 Wh. & T. L. C. 7th erl. at (/) See ss. 146, 147, pp. 480,481, below, p. ")61 ; but the point is now only of (/) Craythorne v. Swinburne (18C7) 14 historical interest even in England, Ves. 160, 9 R. R. 264, and see Lord Eldon's (j>~) InlfufjitfHin \.Jiaseley. See notes judgment, 14 Ves. 169, 9 R. R. 270. on s. 16, p 76, above. SURETY'S RIGHTS ON PAYMENT. 471 guaranteed only a certain part of the debt, or is surety for the whole, but Ss. with a limit of liability (see on s. 128, p. 444, above). 1^0, 141. " When a surety is only a surety for a part of the debt, and has paid .that part of the debt, he is entitled to receive the dividend which the principal debtor pays in respect of that sum which the surety has dis- charged " (s). In such a case it may be said that " the right of the surety arises merely by payment of the part, because that part, as between him and the principal creditor, is the whole." But a surety who has become such, though with limited liability, in respect of the entire debt, has no rights by way of subrogation or in preference to the creditor until the creditor is fully paid (t). Moreover, the benefit of this principle is extended to persons who, though not actually sureties, are in an analogous position. The indorser of a bill of exchange " is primarily liable as principal on the bill, and is not strictly a surety for the acceptor" ; but "he has this in common with a surety for the acceptor, that " after notice of dishonour " he is entitled to the benefit of all payments made by the acceptor, and is entitled, on paying the holder, to be put in a situation to have a right to sue the acceptor" (). A surety (or person 'in a similar position) who has paid his principal's debt is entitled, in the practice of the English Courts, to the same rate of interest as a stranger who has made advances (x). See as to the right of a payer of a bill of exchange for the honour of any party liable upon it the provisions of the Negotiable Instruments Act XXVI of 1881, s. 114. 141. A surety is entitled to the benefit of every security which the creditor has against the principal benefit of creditor's debtor at the time when the contract of surety- ship is entered into, whether the surety knows of the existence of such security or not ; and, if the creditor loses or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security (y) . 0) Gray v. SecWiam (1872) L. K. 7 18, per Lord Blackburn. Ch. 680, 683, per Hellish, L.J. (x) Re Beulah Park Estate (1872) (t) Re Sass [1896] 2 Q. B. 12, 15. L. R. 15 Eq. 43. (it) Duncan Fox $ Co. v. North and -^ (y) See s. 139, p. 467, above. South Wales Bank (1880) 6 App. Ca. 1, Q| 472 THE INDIAN CONTRACT ACT. S. 141. Illustrations. (a) 0. advances to B., his tenant, 2,000 rupees on the guarantee of A. 0. has also a further security for the 2,000 rupees by a mortgage of B.'s furniture. C. cancels the mortgage. B. becomes insolvent, and C. sues A. on his guarantee. A. is discharged from liability to the amount of the value of the furniture. [Op. Pearl v. Deacon (1857) 1 De G. & J. 461, where the creditor, being also the debtor's lessor, destroyed the security on the furniture by distraining it for rent (which in English law is a paramount right).] (b) C., a creditor, whose advance to B. is secured by a decree, receives also a guarantee for that advance from A. 0. afterwards takes B.'s goods in execution under the decree, and then, without the know- ledge of A., withdraws the execution. A. is discharged. [May hew v. Crickett (1818) 2 Sw. 185 ; 19 R. R. 57.] (c) A., as surety for B., makes a bond jointly with B. to C., to secure a loan from C. to B. Afterwards C. obtains from B. a further security for the same debt. Subsequently 0. gives up the further security. A. is not discharged. [The modern doctrine of English equity is contra ; see below.] Surety's right to benefit of securities. " As a surety, on payment of the debt, is entitled to all the securities of the creditor, whether he is aware of their existence or not, even though they were given after the contract of suretyship (z), if the creditor who has, or ought to have had, them in his full possession or power, loses them or permits them to get into the possession of the debtor, or does not make them effectual by giving proper notice, the surety to the extent of such security will be discharged. A surety, moreover, will be released, if the creditor, by reason of what he has done, cannot, on payment by the surety, give him the securities in exactly the same condition as they formerly stood in his hands " (a). " The surety in effect bargains that the securities which the -creditor takes shall be for him, if and when he shall be called upon to make any payment " (&). The creditor, however, is not bound to use extraordinary, or, it would seem, any, diligence about preserving or retaining a security which is in fact worthless (c). (?) See judgment of Hall, V.-C., in 663. Forbes v. Jackson (1882) 19 Ch. D. 615, (b) See judgment of Hall, V.-C., in 619. Forbes v. Jackson, last note but one. (a) 2 Wh. & T. L. C. 4th ed. 1002 (7th (c) Rainbow v. Juggins (1880) 5 Q. B. ed. 600, with some verbal alteration), Div. 422 (a policy on the debtor's life approved by Hannen, J., Wulff v. Jay which had lapsed by non-payment of (1872) L. R. 7 Q. B. 756, 764 ; as to the premiums), last point, Pledge v. Suss (1860) Johns. SURETY'S RIGHT TO BENEFIT OF SECURITIES. 473 It will be seen that the present section, by limiting the surety's right S. 141. to securities held by the creditor at the date of his becoming surety, has adopted a view which was still not wholly abandoned in England when the Act was framed (d), but which has for a good many years been treated as untenable. One cannot help suspecting that this is not deliberate policy, but merely codification of equity somewhat out of date. The rule is not confined to securities in any technical sense. A surety is entitled to the benefit of the principal debtor's set-off against the creditor, if it arises out of the same transaction ; this follows from the surety's right to be indemnified by his principal, combined with the equitable maxim of avoiding circuity of action (0). The High Court of Bombay has cited the reason of the present rule as laid down by Turner, V.-C. (/) : "I take it to be, because, as between the principal and surety, the principal is under an obligation to indemnify the surety [see s. 145, p. 478, below] ; and it is, as I conceive, from this obligation that the right of the surety to the benefit of securities held by the creditor is derived." " To the extent of the value of the security." Where a creditor sued the principal debtor and the surety on a mortgage bond, and in his plaint formally relinquished his claim against part of the mortgaged property which was worth the amount guaranteed by the surety, it was held that the surety was discharged (g). When surety becomes entitled to benefit of creditor's securities. Under s. 140, a surety is invested with the rights of the creditor as against the principal debtor upon payment or performance of all that he is liable for. The words last italicised are not repeated in the present section. The Act does not lay down at what point of time the surety is entitled to have the creditor's securities made over to him wholly or in part, whether it is when the debt of the creditor is paid off, or when the surety pays the amount of his guarantee. The point arose in Goverdhandas v. Bank of Bengal (h), where it was held that a surety was not entitled to the benefit of a portion of the creditor's securities until the whole of the debt due to the creditor was paid off. In that case a surety who had guaranteed an aliquot and (rf) Blackburn, J., seems to have thought Bengal (1890) 15 Bom. 48, 63. The facts the point doubtful in 1876. See Polak v. of the case in Hare were complicated by Ecerett, 1 Q. B. D. at p. 676. We do not fraud, and are not thought useful for any believe he would have found many equity purpose of illustration. Op. Sir S. Romilly's lawyers to share his doubt. argument in Craythorne v. Swinburne, (>) Becliervalse v. Lewis (1872) L. R. p. 470, above. 7 C. P. 372. (Tim<5tnnpp ij invnlirl cealment invalid. nvaild. Illustrations. (a) A. engages B. as clerk to collect money for him. B. fails to account for some of his receipts, and A., in consequence, calls upon him to furnish security for his duly accounting. 0. gives his guarantee for B.'s duly accounting. A. does not acquaint C. with B.'s previous conduct. B. afterwards makes default. The guarantee is invalid. [RaiHon v. Mathews (1844) 10 Cl. & F. 934 ; 59 R. R, 308.] (0 15 Bom. p. 64, GUARANTEE OBTAINED BY CONCEALMENT. 475 (b) A. guarantees to 0. payment for iron to be supplied by him }. 14j3. to B. to the amount of 2,000 tons. B. andC. have privately agreed that B. should pay five rupees per ton beyond the market price, such excess to be applied in liquidation of an old debt. This agreement is con- cealed from A. A. is not liable as a surety. \_Pidcoclc v. Bishop (1825) 3 B. & C. 605 ; 27 E. E. 430.] Guarantee obtained by misrepresentation or concealment. English law is settled that, although the contract of suretyship is "one in which thei'e is no universal obligation to make disclosure" that is, it is not, like a contract of insurance, liable to be avoided by the mere non-dis- closure of any material fact whatever still the surety is entitled to know so much as will tell him what is the transaction for which he is making himself answerable; and he will be discharged if there is either active misrepresentation of the matter by the creditor, or silence amounting in the circumstances to misrepresentation. " Very little said which ought not to have been said, and very little not said which ought to have been said, would be sufficient to prevent the contract being valid " (K). " It is the duty of a party taking a guarantee to put the surety in possession of all the facts likely to affect the degree of his responsibility ; and if he neglect to do so, it is at his peril. ... A surety ought to be acquainted with the whole contract entered into with his principal " (I). Thus where a surety guarantees an agent's existing and futm-e liabilities in account with his employer, and the agent is in fact already indebted to the employer for more than the full amount of the guarantee, and the statements made about his position are calculated to mislead, though not false in terms, this is evidence of material misrepresentation on the creditor's part (in). But it is not every disclosure that a surety can require. Where a customer's credit with his bankers is guaranteed, the fact that the new credit is to be applied to paying off an existing debt of the customer to the bank is not such as need be disclosed. For this is nothing out of the ordinary course of business, but rather to be expected. The test is " whether there is anything that might not naturally be expected to take place between the (/.-) Fry, J., Davies v. London and Pro- that it was the debtor's business to inform rincial Marine Insurance Co. (1878) 8 the sureties of his financial condition, and Ch. D. 469, 475. theirs to inquire of him rather than of (7) Bayley, J., and Littledale, J., Pid- his employers. Generally a surety is not cock v. Bishop, 27 R. II. at pp. 433, 435. the less bound though he may have acted (HI) Lee v. Jones (1863) 17 C. B. N. S. on some misrepresentation made by the 482, Ex. Ch. A minority of the Court debtor : Debendra Nath Dutt v. Adin.- dissented strongly on the facts, holding Gen. of Bengal (1906) 33 Cal. 713, 756. 476 THE INDIAN CONTRACT ACT. S. 143. parties who are concerned in the transaction, that is, whether there be a contract between the debtor and the creditor to the effect that his position shall be different from that which the surety might naturally expect " (n). The creditor's description of the transaction to be undertaken, if it makes no mention of any such circumstance, implies a representation that there is none (o). Accordingly the creditor is not bound to tell the surety that the intended guarantee is to be in substitution for a former one given by some one else (/>). Where the solvency of a surety for a debt is guaranteed in turn, the terms of the loan as between the creditor and the original debtor are not material for the last-mentioned guarantor's risk, and non-disclosure of them is no defence to an action on his guarantee (q). To avoid a guarantee under this section it must be proved not only that there was silence as to a material circumstance, but that the guarantee was obtained by means of such silence (r). The meaning of the words "keeping silence" in this section was considered by Sargent, C.J., in a Bombay case (s). The expression " keeping silence," said the learned Judge, " clearly implies intentional concealment as distinguished from mere non-disclosure, which no doubt is of itself a fatal objection in insurance policies, and virtually, we think, expresses what is laid down in North British Insurance Co. v. Lloyd (<), that the withholding must be fraudulent, Avhich necessarily must be the case when a material circumstance is intentionally concealed." " Material circumstance." As to what amounts to this, further illustrations are afforded by the following cases : 1. A. becomes surety to a bank for B.'s conduct as khajancki, whose duties are to examine, verify, and guarantee all native signatures or docu- ments for money. Before his appointment as Jchajanchi B. held the office of an ordinary clerk in the bank, and it was arranged between B. and the bank that he should continue to fill that office also. The bank do not acquaint A. with this part of the agreement. A. is liable as a surety (u). 2. In the above case, after B. assumes the office of khajanchi, the bank (n) Hamilton v. Watson (1845) 12 Cl. India v. NilamelMni (1883) 6 Mad. 406, & F. 109, 119, 69 R. R. 58, 65 (Lord 408. Campbell). (s) Balkrigkna v. Bank of Bengal (o) Lee v. Jones, note (in) last page, (1891) 15 Bom. 585, 591. See also Delhi judgment of Blackburn, J. and London Bank v. Hunter (1871) 3 (^) North British Insurance Co. v. N.-W. P. 264. Lloyd (1854) 10 Ex. 523. (t) 10 Ex. 523, 532. (q) Seaton v. Bvrnand [1900] A. C. 135. (u) Balkrigkna v. Bank of Bengal (r) Per Cur. in Secretary of State for (1891) 15 Bom. 585. CONCEALMENT OF MATERIAL CIRCUMSTANCE. 477 discovers that the names on certain bills discounted with them are forged, Ss. and they make a claim upon B., but B. repudiates his liability. The bank 143, 144. do not acquaint A. with this fact, and B. is allowed to continue in his office, and subsequently makes defalcations. A. is liable as a surety, for it could not have been assumed that B. was infallible in detecting forgeries, and the guarantee could not be said to be founded on that assumption (x). 3. A. purchases an abkari farm from Government subject to his furnishing the required security for the due fulfilment of the conditions of the lease. A. fails to furnish the security, and the farm is resold at his risk and on his account at a loss of Rs. 4,000, for which he becomes liable. A. purchases the farm at the resale, and B. stands surety for the performance of the conditions of the lease. B. is not informed by Government of A.'s liability for Rs. 4,000. B. is liable as a surety, the guarantee not extending to the liability for Rs. 4,000 (y). The language of these two sections, 142 and 143, is not very well fitted to exclude doubts whether they go beyond the English authorities or not. S. 143 might be read so as to impose on the creditor an unqualified duty of giving the surety full information of all material facts. But the words "obtained by means of. keeping silence," coupled with the fact that the illustrations are both taken, with no substantial change, from English decisions, appear to limit the operation of the section to cases of wilful con- cealment which in fact amounts to a misrepresentation of what the surety is undertaking. 144. Where a person gives a guarantee upon a contract that the creditor shall not act upon it until Guarantee on .... contract that another person has joined in it as co-surety, creditor shall not . . act on it until the guarantee is not valid if that other person co-surety joins. . . does not join. A surety who " entered into the obligation upon the understanding and faith that another person would also enter into it ... has a right in equity to be relieved on the ground that the instrument has not been executed by the intended co-surety " (z). Whether such a contract is to be (cc) Balkrishna v. Sank of Bengal, last did or did not embody the rule of English note. law, the case was to be decided according (y) Secretary of State for India v. to the principles of English law, and NilameUam (1883) 6 Mad. 406, 410. The proceeded to decide the case accordingly, surety bond in this case was executed (z) Evans v. Bremridge (1856) 8 D. M. before the Contract Act came into force, G. 100, 109, per Turner, L.J. Cp. Bonser and the Court stated that, whether s. 143 v. Cox, p. 453, above. 478 THE INDIAN CONTRACT ACT. Ss. inferred from the transaction as a whole is conceived (apart from the con- 144, 145. struction of any written document) to be purely a question of fact. The rule will not be extended to cases of joint and several obligation where the transaction is not really a guarantee, though that word may be used, but a primary undertaking (a). 145. In every contract of guarantee there is an implied implied promise Promise by the principal debtor to indemnify to indemnify surety. the surety . and the surety jg entitled to recover from the principal debtor whatever sum he has right- fully paid under the guarantee, but no sums which he has paid wrongfully. Illustrations. (a) B. is indebted to C., and A. is surety for the debt. 0. demands payment from A., and on his refusal sues him for the amount. A. defends the suit, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can recover from B. the amount paid by him for costs, as well as the principal debt. (b) C. lends B. a sum of money, and A., at the request of B., accepts a bill of exchange drawn by B. upon A., to secure the amount. C., the holder of the bill, demands payment of it from A., and, on A.'s refusal to pay, sues him upon the bill. A., not having reasonable grounds for so doing, defends the suit, and has to pay the amount of the bill and costs. He can recover from B. the amount of the bill, but not the sum paid for costs, as there was no real ground for defending the action. (c) A. guarantees to C., to the extent of 2,000 rupees, payment for rice to be supplied by C. to B. 0. supplies to B. rice to a less amount than 2,000 rupees, but obtains from A. payment of the sum of 2,000 rupees in respect of the rice supplied. A. cannot recover from B. more than the price of the rice actually supplied. Surety's right to indemnity. The proposition " that, as soon as his obligation to pay is become absolute, [a surety] has a right in equity to be exonerated by his principal " (b) is treated throughout the English authori- ties as fundamental, and as furnishing the reason for several of the more specific rules (see p. 473, above). It depends in turn on the more extensive principle laid down in s. 69 (p. 286, above). In the second clause of the section the words " rightfully " and " wrongfully " do not seem felicitous. (a) Ex parte Harding (1879) 12 Ch. (J) Becliervaise v. Lewis (1872) L. K. Div. 557. 7 C. P. 372, 377. IMPLIED INDEMNITY OF SURETY. 479 There is nothing wrongful in paying money which one need not have paid, g. 145. and for which therefore one cannot have a remedy over against the principal debtor. One would rather have expected " reasonably " and " unreason- ably." Here, again, a wider rule is applied to the special case of the contract of suretyship (c). It is not to be inferred from the language of this section that the surety might not, in an appropriate case, be entitled to recover for special damages beyond the sum he has actually been compelled to pay. His right is not merely a right to stand in the creditor's place, but is founded on an independent equity (d). On the other hand, the surety's only claim is to be fully indemnified. He cannot compound the debt for which he is liable, and then proceed as if he stood in the creditor's place for the full amount. " Where a surety gets rid of and discharges an obligation at a less sum than its full amount, he cannot, as against his principal, make himself a creditor for the whole amount ; but can only claim, as against his principal, what he has actually paid in discharge of the common obligation " (e). " Whatever sum he has rightfully paid." This expression includes " not only coin, but also property, of whatever kind, which is parted with in lieu of money, but not the mere incurring of a pecuniary obligation of the creditor in lieu or discharge of the debt owing to him " (/). The giving, therefore, by the surety of a promissory note jointly with a third party as his surety, though accepted by the creditor as payment of the debt and not as a mere collateral security therefor, cannot be treated as payment as between the surety and the principal debtor ((?). The reason is that, the principal debtor being bound to indemnify the surety, the cause of action cannot be merely the procuring by the surety of the principal debtor's exoneration from liability to the creditor, but must also include the surety being himself damnified (A) ; and the surety cannot be said to be damnified unless the payment is actually made. A surety paying a debt which is barred by limitation cannot be said to have paid " rightfully " within the meaning of this section (i). (c) See Agius v. G. W, Colliery Co. 361, 375, 45 R. E. 88, 94 (Lord Gotten- [1899] 1 Q. B. 413, C. A. ; Hammond # Co. ham). v. Bussey (1887) 20 Q. B. Div. 79, cited on (/) Per Bhashyam Ayyangar, J., in s. 73, Illustration (j), p. 308, above. Putti Narayaiiamurthi v. H/arimulJm ($) See per Stirling, J., Badeley v. (1902) 26 Mad. 322, 328. Consolidated Banlt (1886) 34 Ch. Div. at (#) Ib. p. 556. The reversal of the decision on (A) Ib. 326. the main point, 38 Ch. Div. 236, does not (0 Suja v. Pahlwan (1878) Punj. Rec. affect this. no. 30. 00 Reed v. Norrit (1837) 2 My. & Cr. 480 THE INDIAN CONTRACT ACT. S. 146. 146. Where two or more persons are co-sureties for the same debt or duty, either jointly or seve- Co-sureties liable to contribute rally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between them- selves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor. Illustrations. (a) A v B., and 0. are sureties to D. for the sum of 3,000 rupees lent to E. E. makes default in payment. A., B., and C. are liable, as between themselves, to pay 1,000 rupees each. (b) A.., B., and 0. are sureties to D. for the sum of 1,000 rupees lent to E,, and there is a contract between A., B., and C. that A. is to be responsible to the extent of one-quarter, B. to the extent of one-quarter, and C. to the extent of one-half. E. makes default in payment. As between the sureties, A. is liable to pay 250 rupees, B. 250 rupees, and C. 500 rupees. Contribution by co-sureties. This has long been elementary. The earliest case usually cited settled that the co-sureties need not be bound under the same contract, and laid down that the right to contribution is independent of any agreement for that purpose (&). It must be observed that a " surety has no claim against his co- sureties until he has paid more than his share of the debt to the principal creditor " (I), for only then does it become certain that there is ultimately any case for contribution at all. But a judgment against the surety at the suit of the creditor for the full amount of the guarantee (or an equivalent process, such as the allowance of a claim for the sum in the administra- tion of the surety's estate) will have the same effect as payment for this purpose, and entitle the surety or his representatives to a declaration of the right to contribution ; it seems that this is a matter of purely equitable jurisdiction (m). The like principles apply to contribution among co-trustees (n). (A) Deringv.EarlofWinchilgea(l787) Davies v. Humphreys (1840) 6 M. & W. 1 Cox, 318, 2 Bos. & P. 270, 1 R. R. 41 ; and 153, 55 R. R. 547, 559. see other judgments cited by Wright, J., (<) Wolmershausen v. OullicTt [1893] in WolmergJuiusen v. Gullick [1893] 2 2 Ch. 514. Ch. at p. 523 sqq. () Robinson v. HarUn [1896] 2 Ch. (0 Ex parte Snowdon (1881) 17 Ch. 415. Div. 44, 48, per Brett, L.J., following CONTRIBUTION BETWEEN CO-SURETIES. 481 All the co-sureties are entitled to share in the benefit of any security Ss. or indemnity which any one of them has obtained from the principal 146, 147. debtor, and this whether they knew of it or not (o). The surety bringing in, under this rule, what he receives from his security, may resort again to that security for the liability to which he remains subject, and the co-sureties may again claim the benefit of participation, and so on until the co-sureties have been fully reimbursed or the counter-security exhausted (p). There is no right of contribution between persons who become sureties not for the same debt, but by distinct and separate obligations for different portions of a debt (g). Nor is there any such right between an ultimate surety for payment of a debt and a person who, though a surety as between himself and the principal debtor, has authorised the creditor to treat him as a principal. Where B. joined with A. in a mortgage of A.'s property to Z., and agreed to be considered, as regards Z., as a principal debtor for the whole, though as between A. and himself he was a surety, and the debt was insured with M., who knew the terms of B.'s engagement, in the name of Z., M. undertaking to pay the debt on notice that Z.'s power of sale had become exercisable, it was held that M. was a guarantor to Z. against the default of both A. and B., and was not a co- surety with B. (r). An express contract between Z. and M. that M. was to be a surety for, but not with, B., by way of " collateral security," would have the same effect (s). 147. Co-sureties who are bound in Liability of co- sureties bound in different sums are liable to pay equally as different sums. . u * far as the limits of their respective obliga- tions permit. Illwtrations. (a) A., B., and 0., as sureties for D., enter into three several bonds, each in a different penalty, namely, A. in the penalty of 10,000 rupees, B. in that of 20,000 rupees, 0. in that of 40,000 rupees, conditioned for D.'s duly accounting to E. D. makes default to the extent of 30,000 rupees. A., B., and 0. are each liable to pay 10,000 rupees. (b) A., B., and 0., as sureties for D., enter into three several bonds, each in a different penalty, namely, A. in the penalty of 10,000 rupees, B. in that of 20,000 rupees, 0. in that of 40,000 rupees, con- ditioned for D.'s duly accounting to E. D. makes default to the extent 00 Steel v. Dixon (1881) 17 Oh. D. (r) Re Dentoris Estate [1904] 2 Ch. 825. 178, C. A., following the distinction laid (p) Berridge v. -Zte?T(W#e(1890)44 Ch. down in Craythorne v. Swinburne (1807) D. 168. 14 Ves. 160, 9 R. R. 264. O/) Coope v. Twynam (1823) Turn. & (*) Craythorne v. Swinburne. Russ. 426, 24 R. R. 89. i.e. 81 482 THE INDIAN CONTRACT ACT. Ss. of 40,000 rupees. A. is liable to pay 10,000 rupees, and B. and C. 147, 148. 15,000 rupees each. (c) A., B., and 0., as sureties for D., enter into three several bonds, each in a different penalty, namely, A. in a penalty of 10,000 rupees, B. in that of 20,000 rupees, C. in that of 40,000 rupees, con- ditioned for D.'s duly accounting to E. D. makes default to the extent of 70,000 rupees. A., B., and C. have to pay each the full penalty of his bond. The wording of this section and its effect as shown by the illustrations are perfectly clear, and the question why it says " equally " and not " rate- ably," thus making what seems an arbitrary departure from the rule as previously understood, is not one which we have any means of answering. There is no variation between this section and the original draft. CHAPTEK IX. OF BAILMENT. 148. A "bailment" is the delivery of goods by one person to another for some purpose, upon a " Bailment," "bailor," and contract that they shall, when the purpose is " bailee " defined. TIT' i accomplished, be returned or otherwise dis- posed of according to the directions of the person delivering them. The person delivering the goods is called the "bailor." The person to whom they are delivered is called the " bailee." Explanation. If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor, of such goods although they may not have been delivered by way of bailment. The late Mr. Justice Story's (t) works on bailment and agency acquired a classical reputation, and were largely used in this and the following chapter by the framers of the present Act, on the whole with very good results. But, as those works have not been re edited for many years, and (/) Of the Supreme Court of the United admirable exponent of the common sense States from 1811 to 1845. Story was of the law when the state of authority not a subtle or always a thorough critic left him a free hand. He drew largely in dealing with authorities, but be was an on Pothier and other civilian writers. BAILMENT. 483 have, in England at any rate, ceased to be in common use, though fairly S. 148. recent judicial citations occur, it is not thought worth while to furnish the text of the Act, which after all is its own sufficient authority, with specific references to them. Nature of the transaction. " Bailment " is a technical term of the Common Law, though etymologically it might mean any kind of handing over (Fr. bailler). It involves change of possession. One who has custody without possession, like a servant, or a guest using his host's goods, is not a bailee. But constructive delivery will create the relation of bailor and bailee as well as actual, as stated in the Explanation. The bailee's duty to deal with the goods according to the bailor's orders is incidental to the contract of bailment, and arises on the delivery of the goods, although these orders may have already been given and accepted in such a manner as to constitute a prior special contract (u). As a matter of pleading this is no longer material in England or India, but it might still be material with regard to the period of limitation. Bailment is necessarily dealt with by the Contract Act only so far as it is a kind of contract. It is not to be assumed that without an enforceable contract there cannot in any case be a bailment. In England the con- viction of an infant for the statutory offence of larceny by a bailee has been upheld (x). "It is conceived," says Sir R. S. Wright (y), "that in general any person is to be considered as a bailee who otherwise than as a servant either receives possession of a thing from another or consents to receive or hold possession of a thing for another upon an undertaking with the other person either to keep or return or deliver to him the specific thing or to convey and apply the specific thing according to the directions antecedent or future of the other person." The words "otherwise disposed of" in the present section express the common law as now understood. " It seems clear that a bailee is not the less a bailee because he is clothed with authority to sell the thing which is bailed to him," e.g., a factor for sale (2). On the whole a bailment may be described as a delivery on condition, to which the law usually attaches an obligation to redeliver the goods, or otherwise deal with them as directed, when the condition is satisfied ; but there may be, in particular cases, a bailment without an enforceable obligation (a). Where a chattel is delivered by mistake, the intention being to deliver another chattel either with or without conditions, the legal result, whatever () Sti-eetcr v. Jlorlofk (1822) 1 Bing. (y) Pollock and Wright on Possession, 34, 25 R. R. 579. 163. (*) R. v. McDonald (1885) 15 Q. B. D. (z) Sir R. S. Wright, op. cit. 161, 162. 323. (No such question could arise itnder (a) Judgment of Cave, J., R. v. the Indian Penal Code.) McDonald (1885) 15 Q. B. D. at p. 328. 312 M THE INDIAN CONTRACT ACT. S. 148. it may be, is not a bailment ; for there is no intention at all to deliver the chattel which is in fact delivered, and no contract with respect to it. The late Lord Coleridge's opinion " that bailment is not a mere delivery on a contract, but is a contract itself" (6), may not be a very clear or convincing reason for this proposition, but does not affect its truth. The problems which arise in this connection are, however, outside the scope of this Act. The judgment of Holt, C.J., in Coggs v. Bernard (c) is celebrated as the first judicial exposition of this branch of law, as indeed it is one of the earliest attempts, outside the law of real property, to give a connected and rational exposition of any branch of the common law as a whole. But the somewhat minute distinctions there laid down were really taken from the Eoman law through Bracton, and, whether they were ever operative in the law of England or not, they are not adopted in this Act (see s. 151, p. 487, below). One result of Holt's reliance on Bracton is that in later times English Courts have felt themselves rather specially free to refer to the Roman law in questions on the contract of bailment ((/), but this is now in India, and probably in England, rather a matter of literary curiosity than anything else. No bailment where whole property transferred. Obviously no transaction can be a bailment within the Act which does not satisfy the terms of this section. Accordingly there is not a bailment if the thing delivered is not to be specifically returned or accounted for : and so is the common law. A delivery of property on a contract for an equivalent in money or in other commodities (whether like the property delivered or not) is a sale or exchange and not a bailment, as where farmers deliver grain to a miller to be used by him in his trade, and are entitled to claim an equal quantity of corn of like quality or its market price (e). An agent authorised to receive payment, and bound to hand over to his principal an equivalent sum, but not necessarily the actual coin or instruments of credit received by him, is not a bailee (/). Similarly the delivery of Government promissory notes to a treasury for cancellation and consolidation into a single note is not a bailment, for there is no contract in such a case that the notes shall be returned or other- wise disposed of according to the directions of the owner (g). (V) R. v. Ashwell (1885) 16 Q. B. D. Randell (1869) L. R. 3 P. C. 101. at p. 223. (/) See Bridges v. Garrett (1870) (<0 (1703) 2 Lcl. Raym. 909 ; 1 Sm. L. C. L. R. 5 C. P. 451, in Ex. Ch., judgment of 173. Blackburn, J. (cT) See the judgment of the Court in (g) Secretary of State for India in Blakemore v. Bristol and Exeter Ry. Co. Council v. Sheo Singh (1880) 2 All. 756, (1858) 8 E. & B. 1035, 1050. 760. (e) South Australian Insurance Co, v. DELIVERY TO BAILEE. 485 Again the relation between a native banker and the person depositing Ss. money with him in the ordinary way of business is that of borrower and 148 150. lender, and the money so lodged can be recovered only as " money lent " under art. 59 of the Limitation Act, and not as " money deposited " under an agreement that it shall be " payable on demand " under art. 60. In the former case the period of limitation runs from the date of the loan, and in the latter from the date of demand (k). " The mere use of the term ' deposit ' cannot alter the substance of the transaction " (i). It is in each case a question of fact whether a transaction amounts to a mere loan or a deposit under art. 60 (&). 149. The delivery to the bailee may be made by doing Delivery to bailee anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf. See the sections on Delivery (90 94) in the chapter on the Sale of Goods, pp. 375 385, above. The bailor's part need not be very active. Mere assent, for example, of a guest at a place of public entertainment to a servant's officious assumption of custody may be sufficient evidence of delivery to make the proprietor of the house a bailee and responsible for loss (/). 150. The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is Bailor's duty to & disclose faults in aware, and which materially interfere with the goods bailed. TIM use of them, or expose the bailee to extra- ordinary risks ; and, if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults. If the goods are bailed for hire, the bailor is responsible (A) Ichha Dha>iji v. Natlia (1888) 13 where there seems to be some want of Bom. 338. adequate distinction between a deposit of (/.) Per Cur. in Ram Sukh v. Bi-ohmoyi specific goods or coins and a deposit in the Dasi (1879) 6 C. L. R. 470. banking sense, i.e., a loan not immediately (k) Ishur Chunder v. Jibun Ktimari repayable, though the decision is clearly (1888) 16 Cal. 25 ; Perundecitayar v. correct. Nammalvar (1895) 18 Mad. 390 ; Dorabji (I*) Ultzen v. Nicols [1894] 1 Q. B. 92, v. Muncherji (1894) 19 Bom. 352, in app. which really decides very little. ib., p. 775. Op. Re 1'idd [1893] 3 Ch. 154, 486 THE INDIAN CONTRACT S. 150. for such damage, whether he was or was not aware of the existence of such faults in the goods bailed. Illustrations. (a) A. lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B. is thrown and injured. A. is responsible to B. for damage sustained. (b) A. hires a carriage of B. The carriage is unsafe, though B. is not aware of it, and A. is injured. B. is responsible to A. for the injury. [Hyman v. Nye (1881) 6 Q. B. D. 685.] There is no doubt that such is the common law, though there is not much positive authority. The rule of Roman law is that if a man knowingly lends his neighbour foul or leaky vessels, whereby the wine or oil put into them perishes or is lost, he is liable for the damage (m) ; and this was approved in a modern case by the Court of Queen's Bench, though it was decided that the plaintiff, on the facts, represented a person who was not a party to a contract of loan for use, or any contract at all, with the defendants. The case of Illustration (a) is put by the Court and treated as clear. " Would it not be monstrous to hold that if the owner of a horse, knowing it to be vicious and unmanageable, should lend it to one who is ignorant of its bad qualities and conceals them from him, and the rider, using ordinary care and skill, is thrown from it and injured, he should not be responsible ? ... By the necessarily implied purpose of the loan a duty is contracted towards the borrower not to conceal from him those defects known to the lender which may make the loan perilous or unprofitable to him " (n). It is equally certain that a gratuitous lender is not liable for defects in the things lent of which he is not aware (o). A person who delivers to a carrier goods which he knows to be of a dangerous character, such as explosives, and to require extraordinary care in handling, and omits to give warning of it (the nature of the goods not being apparent), is liable for any resxilting damage (p). But this duty seems to be independent of the contract of bailment, and antecedent to the formation of any contract between the parties. With regard to Illustration (b) there is some doubt whether in England the rule would apply to the case where A. hires of B. a specific carriage, not a carriage to be provided by B. at his discretion. But the decisions (;.) D. 13, 6, commod. 18, 3 (Gaius). N. 329. 00 Blahemore (or JBlackmore, 27 L. J. (^) Lyell v. Ganga Dai (1875) 1 All. Q. B. 167) v. Bristol and Exeter Ry. Co. 60; Farrawt v. Barnes (1862) 11 C. B. (1858) 8 E. & B. 1035, 1051. N. S. 553. (o) McCarthy v. Young (1861) 6 H. & DUTY OF BAILEE. 487 upon the hiring of particular kinds of property turn rather on questions of Ss. implied warranty, or unexpressed terms of the contract, and must be used 150, 151. with great caution for the establishment of any general rules () In England the common law liability of an innkeeper has been limited by the Innkeepers' Liability Act, 1863. (q) Choutmull v. Rivers Steam Naviga- tion Co. (1897) 24 Cal. 786, 822. (r) Nariku Ram v. Indian Midland Ry. Co. (1900) 22 All. 361, 362. 492 THE INDIAN CONTRACT ACT. Ss. the burden of proof under ss. 151 and 152 of the Contract Act has arisen 151, 152. 'in India with regard to bailments for hire. The rule may thus be stated, in the words of Strachey, C. J. : " If the damage caused were such that in the ordinary course of events it would not happen to goods of the kind in question if used with ordinary prudence, then I think it would be for the hirer to prove that he had exercised such prudence ; otherwise I think the owner must give some evidence of negligence " (s). Thus where a person hires a horse for riding in a sound condition, and the horse dies the same day while it is in his custody, it is for the hirer to prove that he had taken such care of the horse as a man of ordinary prudence would, under similar circumstances, have taken of his own (t). Similarly, where goods delivered for safe custody for reward are lost while in the possession of the bailee, the burden lies on the bailee to prove absence of negligence on his part (u). But where hotel furniture used by a guest while suffering from an infectious disease is destroyed by the hotel-keeper to prevent infection, it lies on the hotel-keeper to prove, to entitle him to damages for the loss thereof, that the guest did not take as much care of the goods as a person of ordinary prudence would have taken of his own goods under similar circumstances (#). Compare the Transfer of Property Act, s. 76, cl. (a), as to care required of a mortgagee in possession. Bailee's liability for negligence of servants. A bailee's liability extends to damage caused by the negligence of his servants acting in the course of their employment about the use or custody of the thing bailed ; but it does not extend to damage caused by the acts or defaults of third persons which he could not by ordinary diligence have foreseen and prevented, nor to unauthorised acts of his servants outside the scope of their employment (y). 152. The bailee, in the absence of any special con- tract, is not responsible for the loss, destruc- Bailee when not liable for loss, etc., tion or deterioration of the thing bailed, if of thing bailed. . he has taken the amount of care of it described in section 151. (*) Rampal Singh v. Murray % Co. (y) Sanderson v. Collins [1904] 1 K. B. (1899) 22 All. 164, 167. 628, C.A., overruling Coupe Co. v. (0 Shields v. Wilkinson (1887) 9 All. Mad dick [1891] 2 Q. B. 413, so far as it 398, 406. See Evidence Act, s. 106. purports to lay down any different rule (u) Trustees of the Harbour, Madras of law. Cp. Ultzen v. Nicols [1894] 1 v. Best $ Co. (1899) 22 Mad. 524. Q. B. 92, as illustrating the ways in which (x) Rampal Singh v. Murray $ Co. such questions may arise. (1899) 22 All. 164. RIGHTS AND DUTIES OF BAILEE. 493 Note that by English law, "in an action against a stranger for loss of Ss. goods caused by his negligence, the bailee in possession can recover the 152, 153. value of the goods, although he would have had a good answer to an action by the bailor for damages for the loss of the thing bailed." His right is the general right of a lawful possessor against a wrongdoer, and does not at this day depend on his liability to the bailor, whatever may be the true historical view of the mediaeval law (z). The bailee's rights against strangers are naturally not specified in the present Act, as they do not differ from the rights of any other lawful possessor, and arise not from the contract of bailment, but from the fact of possession. Care to be taken by bailee. Since the standard of diligence required of a bailee is that of the average prudent nian, a bailee of goods is not liable for loss of the goods by theft in his shop, if it is shown that he took as much care of the articles bailed as an ordinary prudent man would, under similar circumstances, take of his own goods of the same quality and value (a). For the same reason if A. sends jewels to B. for repairs, asking B. to return them after repair as a value payable parcel, and B. does so, B. is not liable for the loss of the jewels merely because he failed to insure the parcel. Failure to insure the jewels is not evidence of want of such care as a man of ordinary prudence would, under similar circumstances, take of his own goods, especially when the owner himself does not insure them when sending them out for repair (6). 153. A contract of bailment is voidable at the option Termination of f the bailor, if the bailee does any act with act^coSenf 6 ' 8 regard to the goods bailed, inconsistent with with conditions. the conditions of the bailment. Illustration. A. lets to B., for hire, a horse for his own riding. B. drives the horse in his carriage. This is, at the option of A., a termination of the bailment. It is well-settled law that a wrongful use or disposal of the goods by the bailee determines the bailment and remits the bailor to the rights and remedies of a person entitled to possession ; a wrongful act means, for this (z) The " Winkfteld " [1902] P. 42, C. A., must not dwell upon here, overruling Claridge v. South Staffordshire (a) Lalthmi Das v. Bdbu Megh (1900) Tramway Co. [1892] 1 Q. B. 42, 54, 59. Punj. Rec. no. 90. Both the arguments and the judgment of (V) Boseck $ Co. v. Maudlestan (1906) Collins, M.R., contain much valuable Punj. Rec. no. 70. historical discussion, which, however, we 494 THE INDIAN CONTRACT ACT. Ss. purpose, a dealing wholly inconsistent with the terms of the bailment. 153, 154. T| ie English authorities go into refinements as to the precise kind of wrong committed and the precise form of action available which are almost as subtle as anything in either European or Hindu philosophy; but, as these are intimately connected with the old common law system of pleading, we have no occasion to consider them here (c). Merely irregular exercise of a right, such as a sub-pledge to a third person by a pledgee, or a premature sale by a pledgee with power of sale, has not the same effect (d). The present section has the merit of simplicity, and does not appear to have given rise to any litigation. 154. If the bailee makes any use of the goods bailed, Liability of which is not according to the conditions of the unauth^rS g usc Bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them. Illustrations. (a) A. lends a horse to B. for his own riding only. B. allows C., a member of his family, to ride the horse. C. rides with care, but the horse accidentally falls and is injured. B. is liable to make compensation to A. for the injury done to the horse. [See 1 Sm. L. C. 197.] (b) A. hires a horse in Calcutta from B. expressly to march to Benares. A. rides with due care, but marches to Cuttack instead. The horse accidentally falls, and is injured. A. is liable to make compensation to B. for the injury to the horse. [By the common law this is not only a breach of the contract, but an independent wrong, so that a person who could not be sued on the contract, such as an infant, may be liable : Burnard v. Haggis (1863) 14 C. B. N. S. 45.] Illustration (b) is apparently suggested by the case put in old English books of a man borrowing a horse to ride to York and riding to Carlisle. See 1 C. B. 681 ; 68 R. R. 805. Discussion of the old forms of action being here superfluous, no comment is required. 0) Cooper v. Willomatt (1845) 1 C. B. desirous of pursuing the subject. And 672, 68 R. R. 798 ; Fenn v. Bittleston see Pollock on Torts, 8th ed. 364367. (1851) 7 Ex. 152 ; Donald v. Suckling (d) Donald v. SucMing, last note ; (1866) L. R. 1 Q. B. 585 ; Nyberg v. Halliday v. Holgate (1868) Ex. Ch., L. R. Handelaar [1892] 2 Q. B. 202, C. A., may 3 Ex. 299, 302. be commended to the learned reader MIXTURE OF BAILOR'S WITH BAILEE'S GOODS. 495 155. If the bailee, with the consent of the bailor, S. 155. Effectofmixture) mixes the goods of the bailor with his own sin?, of his' goods" ' g ds > the bail r and the bailee Sha11 haVe an with bailee's. interest, in proportion to their respective shares, in the mixture thus produced. This and the two following sections are clear enough. In England there is hardly any modern authority. In a case before the Court of Common Pleas in 1868 (e) a ship laden with cotton was wrecked, and part of the cargo lost, and the marks on a large proportion of the bales that were saved were so much obliterated by sea water that no bale could be identified as belonging to any particular consignee. The Court held that all the owners became tenants in common of the cotton which arrived at its destination in the proportion which the quantities respectively shipped by them bore to the whole quantity shipped. It will be observed that there was no question of bailment, nor did the case otherwise resemble any of those dealt with in the present group of sections, which do not mention accidental mixture at all. The Court added, however : " It has been long settled in our law, that, where goods are mixed so as to become undistinguishable by the wrongful act or default of one owner, he cannot recover, and will not be entitled to his proportion or any part of the property from the other owner." This severe rule, which the Contract Act has not adopted (s. 157, next page), is advocated on moral grounds. Blackstone says: "Our law, to guard against fraud, gives the entire property, without any account, to him whose original dominion is invaded and endeavoured to be rendered uncertain without his own consent " (/). Similarly Kent, adding, however, the qualification, which corresponds to s. 156 (below), that "this rule is carried no further than necessity requires; and if the goods can be easily distinguished and separated, as articles of furniture, for instance, then no change of property takes place. So, if the corn or flour mixed together were of equal value, then the injured party takes his given quantity and not the whole. This is Lord Eldon's construction of the old law " (g). (e) Spence v. Union Marine Insurance at pp. 101, 102. A later reference to this Co., L. R. 3 C. P. 427, 437, 438. by Stuart, V.-C., in Cook v. Addison (1869) (/) Comm. ii. 405. The clumsy locution L. R. 7 Eq. 466, 470, seems to add a new " endeavoured to be rendered " is a strange kind of " confusion " to the subject by exception to the usual elegance of Black- assuming that goods and money are under stone's style. identical rules. Mixture of funds, as it is (17) Commentaries on American Law, called, is a wholly different thing from ii. 365 ; Lord Eldon's dictum is in Lupton the confusio of corporeal goods. Speci- v. White (1808) 15 Ves. at p. 442, 10 R.R. fically deposited hoards of coin might, of 496 THE INDIAN CONTRACT ACT. Ss. The Contract Act is in substantial agreement with the Roman 155157. law (A). 156. If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own Effect of mixture, without bailor's goods, and the goods can be separated or consent, when the . goods can be divided, the property in the goods remains in the parties respectively ; but the bailee is bound to bear the expense of separation or division, and any damage arising from the mixture. Illustration. A. bails 100 bales of cotton marked with, a particular mark to B. B M without A.'s consent, mixes the 100 bales with other bales of his own, bearing a different mark. A. is entitled to have his 100 bales returned, and B. is bound to bear all the expense incurred in the separation of the bales and any other incidental damage. i / O See on s. 155. The proposition is almost too obvious to need stating. Not only this, but any other difficulty caused by unauthorised acts of the bailee which may attend the return of the bailor's goods according to the contract must be at the bailee's risk and expense. 157. If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own Effect of mixture, without bailor's goods, in such a manner that it is impossible consent, when the goods cannot be to separate the goods bailed trom the other goods and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods. Illustration. A. bails a barrel of Cape flour, worth Es. 45, to B. B., without A.'s consent, mixes the flour with country flour of his own, worth only Es. 25 a barrel. B. must compensate A. for the loss of his flour. See on s. 155. By the Trusts Act, s. 66, " where the trustee wrong- fully mingles the trust property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him." course, get mixed, but such are not the below. cases that come before modern Courts of (/t) I. ii. 1, 27. Equity. Cp. the note on s. 160, p. 498, REPAYMENT BY BAILOR OP NECESSARY EXPENSES. 497 158. Where, by the conditions of the bailment, the Ss. goods are to be kept or to be carried, or to ' Repayment by bailor of necessary have work done upon them Dj the bailee for expenses. . the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment. This and the next two sections represent Story's opinion partly of what the law is and partly of what it should be. The latter part of s. 159 is in substantial accordance with an opinion of Paulus in the Digest (13, 6, 17, 3). One does not quite see why in our law the bailee's promise may not be limited to returning the goods at a certain date, or on demand after a certain date, if such is the agreement of the parties. The bailor may intend to accept a promise so qualified as the consideration for parting with the possession of the goods, and there is no known rule of law to prevent effect from being given to that intention. Why not let the parties make their own terms instead of borrowing a fixed rule from a system which has no doctrine of consideration 1 But the truth is that gratuitous bailments, though very common in private life, are not matters of business, and therefore do not come into court. 159. The lender of a thing for use may at any time require its return, if the loan was gratuitous, Restoration of . . goods lent even though he lent it for a specified time or gratuitously. . , purpose. But, it, on the raitn or such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived. No authority has been found for Story's view (i), which appears, as above stated, to be needlessly complicated. On principle the question is what the terms of the contract were. Quaere whether an express contract not to recall a thing gratuitously lent before the expiration of a certain time would not be good in British India notwithstanding this section. There is no difficulty about the consideration. (i) See Story, Bailments, 258. i.e. 32 498 THE INDIAN CONTRACT ACT. : Ss. 160. It is the duty of the bailee to return, or deliver 1 ro 1 n 1 according to the bailor's directions, the goods Return of goods bailed, on expira- bailed, without demand, as soon as the time accomplishment for which they were bailed has expired, or the purpose for which they were bailed has been accomplished. Nothing is said here about the extent of the bailor's remedies if the goods are not forthcoming. He can have an action for damages against the bailee, but also he has further equitable rights. " If the bailee sells the goods bailed, the bailor can in equity follow the proceeds, and can follow the proceeds wherever they can be distinguished, either being actually kept separate, or being mixed up with other moneys " (). " It has been established for a very long period . . . that the principles relating to the following of trust property [compare the Trusts Act, ss. 63 65] are equally applicable to the case of a trustee . . . and to the case of factors, bailees, or other kinds of agents . . . wherever a specific chattel is entrusted by one man to another, either for the purpose of safe custody or for the purpose of being disposed of for the benefit of the person entrusting the chattel ; then either the chattel itself, or the proceeds of the chattel, whether the chattel has been rightfully or wrongfully disposed of, may be followed at any time, although either the chattel itself, or the money constituting the proceeds of that chattel, may have been mixed and confounded in a mass of the like material " (I). The development of this doctrine in cases of trust is not within our scope ; it is connected with the special application and limitation of the rules as to appropriation of payments (s. 61, p. 260, above). 161. If, by the default of the bailee, the goods are not returned, delivered or tendered at the proper Bailee's responsi- . biiity when goods time, he is responsible to the bailor tor any returned " 7 loss, destruction or deterioration of the goods from that time (m). Conversely, if a bailor or consignee omits or refuses to take his goods at the proper time from a carrier (or, it would seem, any other kind of bailee) who is ready and willing to deliver them, he may be liable to (ft) Jessel, M.R., Re Halletfs Estate (;) As to railway contracts, see the (1879) 13 Ch. Div. 696, 710. Indian Railways Act IX of 1890, s. 72. Thesiger, L.J., ib. at p. 723. DEATH OF BAILOR OR BAILEE. 499 % compensate the bailee for any necessary expenses of and incidental to their Ss. safe custody (n). 161 164. 162. A gratuitous bailment is termi- Termination of . gratuitous bailment nated by the death either of the bailor or of by death. J the bailee. The executors of persons who have borrowed things, especially books, do not always remember this, as is shown by common experience. On the other hand, the executors of a lender may tacitly and discreetly, in many cases, treat the loan as a gift without fear of being called to account for a devastavit. The problems hence arising, if any, seem to be rather ethical than legal, save so far as the law of limitation cures this amongst other irregularities. 163. In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or Bailor entitled to increase or profit according to his directions, any increase or from goods bailed. profit which may have accrued from the goods bailed. Illustration. A. leaves a cow in the custody of B. to he taken care of. The cow has a calf. B. is bound to deliver the calf as well as the cow to A. Good sense, and therefore good law, seemingly without any reported authority. 164. The bailor is responsible to the bailee for any loss Bailor's responsi- which the bailee may sustain by reason that bility to bailee. ^ bailor wag nQt ent j t l e( J to ma k e tne b^J. ment, or to receive back the goods, or to give directions respecting them. If the terms of the bailment are such that its natural determination as between the parties is delivery over to a third person, and there is a paramount title elsewhere, the bailee may be in difficulties, which, however, are mitigated by s. 166. (n) G. TV. R. Co. v. Swaffield (1874) master of a ship where a cargo is -left on L. R. 9 Ex. 132, following and extending his hands at the port of arrival : Carqoex to carriers by land the decision of the " Argos" (1872) L. R. 5 P. C. 134. Judicial Committee as to the rights of the 822 500 THE INDIAN CONTRACT ACT. Ss. 165. If several joint owners of goods bail them, the J O K H Of> bailee may deliver them back to. or according Bailment by . several joint to the directions of, one joint owner without the consent of all, in the absence of any agreement to the contrary. "May," not "must"(o). Even if there is an agreement to the contrary, one of several joint owners cannot, after having accepted redelivery from the bailee, sue him jointly with the other owners ; for "one party to a contract cannot maintain an action for a breach occasioned by his own act, and neither can three parties maintain an action unless each party separately could " (p). Dr. Whitley Stokes charges this section with contradicting all known laws, but quaere whether he attended sufficiently to the difference made by the enactment being only permissive. 166. If the bailor has no title to the goods, and the Bailee not bailee, in good faith, delivers them back to, or dXT^tobaiio 6 ; according to the directions of, the bailor, the without title. bailee is not responsible to the owner in respect of such delivery. Estoppel of bailee. Cp. the Evidence Act I of 1872, s. 117: "... Nor shall any bailee or licensee be permitted to deny that his bailor or licensor had, at the time when the bailment or licence com- menced, authority to make such bailment or grant such licence. . . Expl. 2. If a bailee delivers the goods bailed to a person other than the bailor, he may prove that such person had a right to them as against the bailor." The rule of the Common Law is that generally a bailee is estopped from denying his bailor's title. He is not only justified in delivering to the bailor or according to his directions, but he is not justified in refusing to deliver to the bailor unless he is under the effective pressure of an adverse claim, and defends upon the right and title and by the authority of the third person so claiming. There must be something equivalent to an eviction by a paramount title, which if it actually took place would (0) May v. Harvey (1811) 13 East, 197, of the defendant's possession. 12 R. R. 322. In Broadbent v. Ledward (^) Brandon v. Scott (1857) 7 E. & B. (1839) 11 A. & E. 209, 52 R. R. 321, it 334. does not appear what was the character 501 of course determine the bailment () European and Australian Royal 1 Q- B. 521, C. A. Mail Co. v. Royal Mail Steam Packet Co. 0*0 It is sufficient to refer to the judg- (1861) 30 L. J. C. P. 247. This is really ment of Lindley, L.J., in Rogers, Sons ft the application of a wider principle. See Co. v. Lambert $ Co. [1891] 1 Q. B. 318, ss. 53 and 67, pp. 246, 284, above. 327. (s) Ex parte Davies (1881) 19 Ch. 502 THE INDIAN CONTRACT ACT. Ss. 168. The finder of goods has no right to sue the owner ' ' Right of finder of f r compensation for trouble and expense speSfic reward 6 for voluntarily incurred by him to preserve the offered. goods and to find out the owner ; but he may retain the goods against the owner until he receives such compensation ; and, where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it. By the Common Law a person who finds lost goods and holds them with the intention of saving them for the true owner is certainly not a trespasser, and has no higher duties than a bailee (y) ; but, the service being rendered without request from the owner, he does not seem entitled to any remuneration unless a specific reward has been offered for the return of the goods, and the offer has come to his knowledge (see p. 46, above) ; and if he cannot claim compensation there is no ground on which he can retain the goods. But it seems the Court would be astute to lay hold of any evidence which might constitute a cause of action for a meritorious finder who had been at substantial pains, and it is possible that in some cases he might have rights analogous to a salvor's (z) . It appears to have been a current opinion as late as the seventeenth century that a finder could abandon the goods with impunity (a). The rule of the present section appears to be intended to satisfy natural justice. Presumably the compensation, if no specific reward has been offered and the parties cannot agree, is to be what the Court considers reasonable. If the parties do agree, the owner's promise of reward may be binding under s. 25, sub-s. 2 (p. 148, above). See Story, Bailments, 12lA. 169. When a thing which is commonly the subject of sale is lost, if the owner cannot with reason- when finder of thing commonly able diligence be found, or if he refuses, upon on sale may sell it. demand, to pay the lawful charges of the finder, the finder may sell it (y) Imack v. Clark (1615) 2 Bulstr. at H. Bl. 254, 3 R. R. 374. p. 312, fully cited by Sir R. S. Wright in (a) Imack v. Clark (1615) 2 Bulstr. at Pollock and Wright on Possession at p. 312 ; Pollock and Wright on Possession P- 177. at p. 177. (z) Nicholson v. Chapman (1793) 2 BAILEE'S PARTICULAR LIEN. 503 (1) when the thing is in danger of perishing or of Ss. losing the greater part of its value, or, 169> 170> (2) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value. This section is taken from the New York Draft Civil Code, s. 943, where it is stated to be a new provision. It does not appear to have come before the Indian Courts. At common law sale by the finder would be a conversion. 170. Where the bailee has, in accordance with the Bailee's par- purpose of the bailment, rendered any service ticuiariien. involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a con- tract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them. Illustrations. (a) A delivers a rough diamond to B., a jeweller, to be cut and polished, which is accordingly done. B. is entitled to retain the stone till he is paid for the services he has rendered. (b) A. gives cloth to B., a tailor, to make into a coat. B. promises A. to deliver the coat as soon as it is finished, and to give A. three months' credit for the price. B. is not entitled to retain the coat until he is paid. Principle of Bailee's Lien. This section expresses the " common law principle that if a man has an article delivered to him, on the im- provement of which he has to bestow trouble and expense, he has a right to detain it until his demand is paid " (b). " Where a bailee has expended his labour and skill in the improvement of a chattel delivered to him, he has a lien for his charge in that respect. Thus the artificer to whom the goods are delivered for the purpose of being worked up into form, or the farrier by whose skill the animal is cured of a disease, or the horse-breaker by whose skill he is rendered manageable, have liens on the chattels in respect of their charges " (c). An agister, who merely takes in an animal to feed it, is not entitled to a lien, as not coming within (b) Best, C.J., in Bevan v. Waters (1838) 4 M. & W. 270, 283, 51 B. R. 568, (1828) 3 Car. & P. 520, 33 R. R. 692. 678. (c) Parke, B., iu Scarfe v. Morgan 504 THE INDIAN CONTRACT ACT. g s this principle, for he does not confer any additional value on the thing 170, 171. entrusted to him (e?). Further, where a person does work on goods delivered to him under an' entire contract, the fact that the deliveries are at different times does not affect his right to a lien on all goods dealt with under that contract (e). It has accordingly been held by the High Court of Calcutta that where jute was delivered to a pressing company from time to time to be baled, but all under one contract, the lien attached to all such goods (/). Contract to the contrary. Where there is an express contract to do certain work for a specified sum of money, there is no room for a quantum meruit claim. A person, therefore, to whom an organ is delivered for repairs for a certain sum is not entitled to retain it as security for a sum of money claimed not under the contract, but for work done () Kunlian v. Bank of Madras (1895) (k) Wolstenholm v. Sheffield Bank (1886) 19 Mad. 234. 54 L. T. 746. (V) Re Bowes (1886) 33 Ch. D. 586. (T) Lucas v. Dorrein (1817) 7 Taunt. (q~) Lease v. Martin (187H) L. R.17 Eq. 278, 18 R. R. 480. 224. (m) Wylde v. Radford (1864) 33 L. J. (r) Misa v. Currie (1876) 1 App. Cas. Ch. 51. 554 ; London Chartered Bank v. White (w) Brandao v. Barnett (1846) 12 Cl. (1879) 4 App. Cas. 413. 506 THE INDIAN CONTRACT ACT. S. 171. In the case of money and negotiable securities, the lien is not prejudiced by any defect in the title of the customer, nor by equities of third persons, provided the banker acts honestly and without notice of any defect of title (). But there is no lien for advances made after notice of a defect in the customer's title (<), or after notice of an assignment of the moneys or securities in the banker's hands (u). And in the case of securities which are not negotiable, the lien is confined to the rights of the customer therein, and is subject to all equities affecting them at the time when the lien attaches (v). Factor. A factor " is an agent entrusted with the possession of goods for the purpose of sale " (w). He may buy and sell either in his own name or in that of the principal, though " he usually sells in his own name, without disclosing that of his principal." The factor is said to have a " special property " in the goods consigned to him (#). Private instruc- tions to sell only in the principal's name or within fixed limits of price will not make him the less a factor or deprive him of his claim to lien(y). The secretaries and treasurers of a company, who have made advances to the company and incurred expenses and made disbursements on behalf of the company in the conduct of its business, are not factors, and are not entitled to any lien on the property of the company in their possession (z). Similarly a banian in Calcutta has no lien for a general balance of account in the absence of an express contract to that effect (a). Though advances made by a factor for sale confer a lien on him, they do not confer upon him the right to sell invito domino. To claim such a right there must be an agreement either express or to be inferred from the general course of business or from the circumstances attending the particular consignment (b). Conformably to the principle governing all general liens, a factor's lien, where it exists, applies only to debts due to the factor in that character; () Bank of New SoutJi Wales v. (1883) 25 Ch. Div. 31, 37. Goulburn Suiter Factory [1902] A. C. (^) Baring v. Cowle (1818) 2 B. & Aid. 543 ; Misa v. Currie, supra; Brandao v. 137, 20 R. R. 383, per Abbott, C.J., 2 B. Burnett (1846) 12 01. & F. 787, 69 R. R. & Aid. at p. 143, Holroyd, J., at p. 148. 204. (jO Stevens v. Bitter (1883) 25 Ch. Div. (t) Solomons v. Bank of England (1810) 31,37. 13 East, 135, 12 R. R. 341 ; Locke v. (z) In re Bombay Saw Mills Co. (1889) Prescott (1863) 32 Beav. 261. 13 Bom. 314, 320. (u) Jeffreys v. Agra Bank (1866) L. R. (a) Peacock v. Baijnath (1891) 18 Cal. 2 Eq. 674. 573, L. R. 18 Ind. Ap. 78. (v) London and County Bank v. (&) Ja/erbkoy v. Cliarlesworth (1893) Ratcliffe (1881) 6 App. Cas. 722. 17 Bom. 520, 542. (M>) Cotton, L.J., in Stevens v. Biller FACTOR'S AND WHARFINGER'S LIEN. 507 it does not extend to " debts which arise prior to the time at which his S. 171. character of factor commences " (c). But it extends to all his lawful claims against the principal as a factor, whether for advances, or remuneration, or for losses or liabilities incurred in the course of his employment in respect of which he is entitled to be indemnified (d). In order that the lien may attach, the goods must come into the possession, actual or constructive (e\ of the factor. If, for instance, a factor accepts bills on the faith of a consignment of goods which, by reason of the bankruptcy of the principal, are never received by him, he has no lien on the goods as against the principal's trustee in bankruptcy (/). Nor does the lien extend to goods acquired otherwise than in his character of a factor (g), or entrusted to him with express directions or for a special purpose inconsistent with the existence of a general lien (h). Instructions to provide, out of the proceeds of a consignment, for a bill of exchange drawn by the principal on the factor in favour of a third person will exclude the factor's general lien unless he pays the bill of exchange (i). Wharfingers. The lien of a wharfinger is, generally speaking, only effective as regards claims against the owner of the goods. He has no lien as against a buyer for charges becoming due from the seller after he has had notice of the sale (I) ; and where it was agreed between a buyer and seller, before the goods sold came to the hands of the wharfinger, that the contract of sale should be rescinded, it was held that he had no lien as against the seller for a general balance due to him from the buyer (m). Owners of a screwhouse who have a wharf as an accessory are not wharfingers (k). ^ (c) Houghton v. Matthews (1803) 3 B. held that his general lien did not extend & P. 485, 488, 7 K. R. 815, 816. to the policy of insurance). (W) Hammonds v. Barclay (1802) 2 (h~) Spalding v. Ending (1843) 6 Beav. East, 227, where the principal died during 376, 63 R. R. 120 (bill of lading pledged the currency of certain bills accepted by to factor for specific amount) ; Burn v. the factor on the faith of a consignment Brown (1817) 2 Stark. 272, 19 R. R. 719 of goods; Drinltwater v. Goodwin (1775) (certificate of ship's registry entrusted to Cowp. 251 (liability incurred by the factor factor for the purpose of paying duties at as surety for the principal). custom-house). (fl) liryam v. Nix (1839) 4 M. & W. (/) Frith v. Forbes (1862) 4 De G. F. 775, 51 R. R. 829. And see Lutscher v. & J. 409 ; Calvin v. Hartwell (1837) 5 Cl. Comptoir d'Escompte ( 876) 1 Q. B. D. & F. 484. 709. (It) Miller v. Nasmyth's Patent Press (/) Kinloch v. Craig (1790) 3 T. ~R. Co. (1882) 8 Cal. 312. 119, 783, 1 R. R. 664. (Z) Barry v. Longmore (1840) 12 A. & (g) Dixon v. Stansfeld (1850) 10 C. B. E. 639, 54 R. R. 654. 398, 84 R. R. 631 (where a factor insured (m) Richardson v. Goss (1802) 3 B.& P. a ship on the principal's behalf, it was 119, 6 R. R. 727. 508 THE INDIAN CONTRACT ACT. g. 171. Attorneys. Tn England a solicitor has alien on his client's documents (not only deeds and law papers) (n) entrusted to him as solicitor (o) " for all taxable costs, charges, and expenses incurred by him as solicitor for his client ; but he has no lien for ordinary advances or loans. His taxable costs, charges, and expenses would include money payments which he makes for his client in the course of his business, such as counsel's fees " (p). Taking a special security from the client is not necessarily an abandon- ment of the general lien, but it will be so if the circumstances are inconsistent with the continuance of the lien, and if the solicitor does not expressly reserve his lien an intention to waive it will generally be inferred, having regard to the solicitor's duty to give his client full information (q). A solicitor who is discharged by his client holds the papers entrusted to him subject to his lieu for costs ; -and the lieu extends also to translations of documents made by the Court's translator at his expense (?). If, how- ever, a solicitor discharges himself (s), he is not, according to English law, entitled to a lien, and the same law applies in India. S. 1 saves usages and customs of trade not inconsistent with the provisions of this Act, and the usage of trade of attorneys sanctioned by English law is not inconsistent with this section. Applying this reasoning, it was held by the Calcutta High Court chat a dissolution of a firm of solicitors operates as a discharge of the client who employs them, and the attorneys are not entitled to retain the papers until their costs are paid (t). The kinds of lien dealt with in this Act are as follows : (1) Lien of unpaid vendor of goods (s. 95, p. 385, above) ; (2) Lien of finder of goods (s. 168, p. 502, above) ; (3) Particular lien of bailees (s. 170, p. 503, above); (n) E.g., cheques : General Share Trust (ff) 2b. at pp. 597, 601 ; Re Douglas Co. v. Cliapman (1876) 1 C. P. D. 771. Norman % Co. [1898] 1 Ch. 199. The (0) Sheffield v. Eden (1878) 10 Ch. leading earlier authorities are Cowell v. Div. 291 (solicitor mortgagee has no lien Simpson (1809) 16 Ves. 275, 10 R. R. 181, on mortgage deed for costs of mortgage ; and Stevenson v. Blakelock (1813) 1 M. & here the deed is not the client's property S. 535, 14 R. R. 525. at all) ; Champernown v. Scott (1821) 6 () Bai Kesserbai v. yrranji (1880) Madd. 92, 22 R. R. 248, 13 Enc. Laws of 4 Bom. 353. Engl. 2d ed. 494, s.i: Solicitor, which see (s) An attorney who declines to act for details of English practice on the further for a client unless costs already subject. incurred are paid discharges himself : (p) Lindley, L.J., Re Taylor, Stileman, Basanta Kuinar v. Kusum Kumar (1902) and Underwood [1891J 1 Ch. 590, 596 ; 4 C. W. N. 767 ; Atool Chandra Mukerjee " all such claims against the client as the v. Shoshee Bhusan (1904) 6 C. W. N, 215. taxing master has to consider," per (0 Re McCorkindale (1880) 6 Cal. 1, Kay, L.J., at p. 599. following Re Moss (1866) L. R. 2 Eq. 345. BAILMENTS OF PLEDGES. 509 (4) General lien of bankers, factors, wharfingers, High Court attorneys, Ss. and policy-brokers (s. 171, p. 504, above) ; 171, 172. (5) Lien of pawnees (ss. 173, 174, p. 510, below) ; and (6) Lien of agents (s. 221, p. 570, below). Some further comments with regard to liens, general and particular, of agents and sub-agents, and to the modes in which such liens may be extinguished or lost, will be found at pp. 570 573, post. As to lien of railway administrations, see Railways Act IX of 1890, s. 55. The sections of the Indian Contract Act relating to Hen are not exhaustive, and do not negative the existence of lien in cases not specified therein. On general principles, and in the absence of any direct provision to the contrary, an arbitrator has a lien on his award for the payment of his reasonable charges (u). Bailments of Pledges. 172. The bailment of goods as security for payment of a debt or performance of a promise is " Pledge," r .... " pawnor," and called " pledge." The bailor is in this case " pawnee " defined. . -. called the "pawnor. The bailee is called the " pawnee." This section affirms the Common Law. The bailee under a contract of pledge does not become owner, but, as having possession and right to possess, he is said to have a special property (x). Any kind of goods, documents, or valuable things of a personal nature may be pledged (y). Delivery is necessary to complete a pledge ; it may be actual or constructive, and it is sufficient if the thing pledged is delivered under the contract within a reasonable time of the lender's advance being made (z). The rules of delivery and the like which are generally applicable to bailments are applicable here. A pawnee may redeliver the goods to the pawnor for a limited purpose without thereby losing his rights under the contract of pledge, as for the purpose of enabling the pledger to sell the goods on the pledgee's behalf (a). If the pawnor, however, abuses his authority in (jf) In re Cyril KirTtpatrlok (1897) (y*) 10 Bnc. Laws of Engl. (2nded.) 642, Punj. Rec. no. 22. The analogy between citing Story. a seller of goods and an arbitrator (z) Hilton v. Tucker (1888) 39 Ch. D. suggested by Roe, C.J., to bring the arbi- 669. This case has been discussed with trator's case within s. 95 of the Act, seems reference to so-called symbolical delivery to be far-fetched, at p. 377, above. (a?) See per Bowen, L.J., Ex parte (a) North- Western Sank v. Poynter, Hubbard (1886) 17 Q. B. Div. at p. 698. Son $ Macdonalds [1895] A. C. 56. 510 THE INDIAN CONTRACT ACT. Ss. such a case by selling or pledging afresh on his own account to a third *'* !'" person who gives value in good faith, the pawnee is not entitled to the goods as against that person, who has received possession from an owner lawfully in possession, though using his possession fraudulently (b). According to mercantile usage found to obtain in the city of Amritsar, if a person leaves goods with another and then borrows money from him, the loan is to be understood to be made on the security of the goods, so that if the loan is not repaid the creditor may sell the goods and appropriate the proceeds of the sale towards his debt (c). 173. The pawnee may retain the goods pledged, not Pawnee's right on ly ^ or payment of the debt or the perform- ance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. The pawnee makes himself a wrongdoer if he persists in holding the goods after tender of all that is due. In that event his " special property" is determined by his wrongful refusal of a tender properly made, and the pawnor can recover the goods (d). 174. The pawnee shall not, in the absence of a contract Pawnee not to to that effect, retain the goods pledged for anv debt or promise other than the debt or promise for which they are pledged ; but such contract, in the absence of anything to the advances. contrary shall be presumed in regard to subsequent advances made by the pawnee. This section does not appear to need any comment. 175. The pawnee is entitled to receive from the pawnor Pawnee's right as extraordinary expenses incurred by him for to extraordinary ,-, . . . i -, -, -, -, expenses incurred, the preservation of the goods pledged. "Receive." Note that the word is not "retain," as in the two preceding sections, but " receive." A pawnee has, therefore, no right of (J) Bdbcock v. Lawmm (1880) 5 (d) Settled law. See the Judicial Com- Q. B. D. 284. mittee per Lord Macnaghten, Bank of (c) Plrthi Mai v. Gap, Nath (1886) New Simth Wales v. O'Connor 1880) 14 Punj. Rec. no. 34. App. Ca. 273, 282. RIGHTS OF PAWNEE. 511 lien for "extraordinary" expenses, as he has in the case of " necessary " Ss. expenses (s. 173), but has only a right of action in respect of them. As 175,176. an example of the expenses contemplated by this section, Dr. Whitley Stokes (in "The Anglo-Indian Codes") suggests "the cost of curing a pawned horse which meets with an injury by accident." There does not appear to be any distinct English authority. See, however, Kent's Commentaries, ii. 579. 176. If the pawnor makes default in payment of the debt, or performance, at the stipulated time Pawnee's right . 1-1 where pawnor of the promise, in respect of which the goods makes default. . were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security ; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor. The substance of this section is familiar and well-settled English law. It is sufficient to cite one or two modern dicta. "A contract of pledge carries with it the implication that the security may be made available to satisfy the obligation, and enables the pledgee in possession (though he has not the general property in the thing pledged, but a special property only) to sell on default in payment and after notice to the pledger, although the pledger may redeem at any moment up to sale " (e). After sale it is the pawnee's ordinary right "to recover the balance of the loan unsatisfied on the sale of the pledge " (/). Where no time is originally stipulated for payment, it seems that " the debtor is not in default until notice is given by the creditor that he requires payment on a certain day, and that day is past. The debtor is then in default, and is in the same position as if a day for repayment had been fixed in the original contract " () 8 Bom. L. K. 5 M. I. A. 1. 344. () S/iadiRamv.AraIttabChand(18S5') (y) Chummun Khan v. JUody (1874) Punj. Rec. no. 1. Punj. Kec. no. 70. (x) A mortgage of movable property, (z) Long settled law : floare v. Parker although not accompanied by possession, (1788) 2 T. R. 376, 1 R. R. 500. is valid in India : Shrixh Chandra Roy v. ( be dealt by such suits. yfith according to their respective interests. In other words, it does not matter which of them recovers first, or whether one sues or both. Of course the defendant cannot be liable in all for m ore than the value of the goods, and special damages, if any. CHAPTER X. AGENCY. [In the commentary on this chapter " Story on Agency" is referred to as S.A.] Appointment and Authority of Agents. 182. An " agent " is a person employed to do any act for another or to represent another in dealings " principal " with third persons. The person for whom such act is done, or who is so represented, is called the " principal." (ft) S : r R. S. Wright in Pollock and C. B. N. S. 850. Wright on Possession, 166. (d) The " Winhfield "' [1902] P. 42, C. A. (<0 Near v. L. % S.-W. It. (1862) 11 518 THE INDIAN CONTRACT ACT. S. 182. Nature of Agency in General. The law stated in the introductory group of sections (182-189) under this beading is too elementary to need mud) exposition. The essential point about an agent's position is his power of making the principal answerable to third persons. A person does not become an agent on behalf of another merely because he gives him advice in matters of business (e). Agency sometimes has to be distinguished from facts more or less resembling it. The legal relation between a merchant in one country and a commission agent in another is that of principal and agent, and not seller and buyer, though this is consistent Avith the agent and principal, when the agent consigns the goods to the principal, being in a relation like that of seller and buyer for some purposes (/). A merchant, therefore, in this country who orders out goods through a firm of commission agents in Europe cannot hold the firm liable as if they were vendors for failure to deliver the goods. And the result is the same if the goods are ordered out through a branch in this country of a firm of commission agents in another country () MoJtffh Chandra Bosu v. Radha Klxhore. Bhattacherjce (1908) 12 C. W. N. 28, 32. (/) Ireland v. Livingstone (1872) L. R. 5 H. L. 395 ; Cassaboglint v. Glib (1883) 11 Q. B. Div. 797 ; cp. p. 393, above. (0) Mahomedally v. Schiller (1889) 13 Bom. 470. The order to the defendants in this case was in the following form : " I hereby request you to instruct your agents to purchase for me (if pos- sible) the undermentioned goods on my account and risk upon the terms stated below." (/<) Shaw v. linij Natli (1897) 1'unj. Ilec. no. 21. (/) See PaulBeierv. Chotalaljarerdas (1906) 30 Bom. 1, cited in notes to s. 211, below. AGENCY. 519 duly perform the contracts (k). A del credere agency may be inferred from Ss. a course of dealing between the principal and agent showing that extra !""> loo. remuneration was charged for the risk of bad debts (I). A del credere agent incurs only a secondary liability towards the principal, being in effect a sui-ety for the persons with whom he deals (&). It is sometimes difficult to decide whether a consignee of goods for sale is a del credere agent or buyer, where he is permitted to sell at such prices and on such terms as he thinks fit, and allowed to retain any profits over and above an agreed price, the payment of which he guarantees to the principal (n). Co-agents. Two or more persons may be employed to act as agents jointly, or severally, or jointly and severally. In the absence of circum- stances indicating an intention to the contrary, an authority given to two or more persons is presumed to be given to them jointly and not severally, and in such case it is necessary that they should all concur in the execution of the authority in order to bind the principal (o), unless it is provided that a certain number of them shall form a quorum (p). There is, however, an exception to this rule where the authority conferred is of a public nature. In such a case, if all the persons in whom the authority is vested meet for the purpose of exercising it, the act of the majority is considered that of the whole body (ith (1879) 10 520 THE INDIAN CONTRACT ACT. Ss. 184. As between the principal and third persons any -< ni i niy who may be an person may become an agent ; but no person a s ent - who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal according to the provisions in that behalf herein contained. As between the principal and third persons, the act of an agent is looked upon as the act of the principal who authorised it. Hence the rule that a person who has no capacity, or only a limited capacity, to contract on his own behalf is competent to contract so as to bind his principal. In pursuance of this rule it has been held that the fact of an agent being unable to read or write constituted no ground for the avoidance by the principal of a written contract made by the agent on his behalf (s). Consideration 185. No consideration is necessary to not necessary. cre ate an agency. By the common law no consideration is required to give a man the authority of an agent, nor to make him liable to the principal for negligence in that which he has already set about, for such liability, though it may be denned by the terms of a contract, is in its nature independent of con- tract ; but a merely gratuitous employment or authority does not bind the agent to do anything ; and if, having neither reward nor promise of reward, he does nothing at all, the principal does not appear to have any remedy (see Anson, p. 350). But this distinction is of little practical importance, if any. Agent's authority 186. The authority of an agent may be may be expressed n . -, . -, or implied. expressed or implied. Express Authority. See particularly Registration Act III of 1877, s. 32 (agent for registration) ; and Code of Civil Procedure, s. 39 (appoint- ment of pleader) (i), and s. 506 (authority to pleader for reference to arbitration). 187. An authority is said to be express when it is given by words spoken or written. An Definitions of . . L express and implied authority is said to be implied when it is to authority. ' . be inferred from the circumstances of the 0) Foreman v. Great, Western Ry. Co. () Code of 1908, o. 3, r. 4. (1878) 38 L. T. 851. AGENCY I EXPRESS AND IMPLIED AUTHORITY. 521 case ; and things spoken or written, or the ordinary course S. 187. of dealing, may be accounted circumstances of the case. Illustration. A. owns a shop in Serampur, living himself in Calcutta, and visiting the shop occasionally. The shop is managed by B., and he is in the habit of ordering goods from C. in the name of A. for the purposes of the shop, and of paying for them out of A.'s funds with A.'s know- ledge. B. has an implied authority from A. to order goods from C. in the name of A. for the purposes of the shop. Implied Authority. It is needless to cite authorities to show that the ordinary course of affairs must be regarded in order to ascertain the extent of an authority not denned except by the general nature of the business to be done. " A person who employs a broker must be supposed to give him authority to act as other brokers do" (M). It might be difficult, but happily there is no need, to draw a clear line between cases falling under the latter part of this section and those falling under the second paragraph of s. 188. As to the saving of usages of trade under this Act, see on s. 1, p. 7, above. A power of attorney authorising the holder " to dispose of " certain property in any way he thinks fit does not imply an authority to mortgage the property (v). Nor does a power of attorney to an agent to carry on the ordinary business of a mercantile firm imply an authority to draw or indorse bills and notes (a 1 ). Authority on dissolution of partner- ship to settle the partnership affairs does not authorise the drawing, accept- ing, or indorsing of bills of exchange in the name of the firm (y). Husband and Wife. This is a special and important case of implied authority. " The liability of a husband for a wife's debts depends on the principles of agency, and the husband can only be liable when it is shown that he has expressly or impliedly sanctioned what the wife has done " (z). " Thus a person dealing with a wife and seeking to charge her husband must show either that the wife is living with her husband and managing the household affairs, in which case an implied agency to buy necessaries is presumed (a), or he must show the existence of such a state of things as would warrant her in living apart from her husband and claiming support (?/) button v. Tatham (1839) 10 Ad. & ments Act, 1881, s. 27. E. 27, 50 R. R. 312, per Littledale, J. (y) AM v. Button (1800) 3 Esp. 108, (r) Malultchand v. Shan Moghan (1890) 6 R. R. 818. 14 Bom. 590 ; Banlt, of Bengal v. Fagan (V) Glrdharl Lai v. Crawford (1886) 9 (1849) 5 M. I. A. 27, 41. All. 147, 155. (.r) Pestonji v. Gool Mahomed (1874) () Not conclusively: Debenham v. 7 M. H. C. 369. See Negotiable Instru- Mellon (1880) 6 App. Ca. 24 522 THE INDIAN CONTRACT ACT. S. 187. r maintenance, when, of course, the law would give her an implied authority to bind him for necessaries supplied to her during such separation in the event of his not providing her with maintenance " (6). Where a European husband and wife, therefore, lived together, it was held that the husband was not liable for moneys borrowed by the wife to pay her previous debts, and not for the purpose of any household or necessary expenses (c). Similarly, a European husband is not liable for the price of goods supplied to his wife, where the husband was remitting to her sums amply sufficient for her maintenance and had expressly forbidden his wife to pledge his credit, and, further, the wife kept a boarding school and was in receipt of payments made by the parents of children boarding with her (d). Much the same principles apply to Hindus. A Hindu wife living separate from her husband because of his marriage with a second wife has no implied authority to borrow money for her support, as the second marriage does not justify separation (e). But when a woman governed by the provisions of the Married Women's Property Act III of 1874 has separate property of her own (/), the presumption would be that she was not pledging her husband's credit. A European wife subject to the last-mentioned Act carried on the business of a milliner, and the husband had no concern in it ; it was held that he was not liable for debts contracted by the wife in the management of that business (g). But, whatever be the law to which the parties are subject, it is clear that there can be no presumption of agency where moneys are borrowed by a woman in her own right as heir to her husband under the belief that the husband is dead. In such a case the lender must be taken to have dealt with the woman in her own right, "and not looking in any way to the husband as responsible for the debt" (A). It is now settled in England that " the question whether a wife has authority to pledge her husband's credit is to ba treated as one of fact, upon the circumstances of each particular case, whatever may be the pre- sumption arising from any particular state of circumstances " (i), such as the presumption from a man and his wife living together in the ordinary way "that he entrusts her with such authorities as are commonly and (1) Viratrami \. Appasmnd (1863) 1 122. M. H. C. 375. The authority of necessity, (/) See notes on s. 11, p. 59, ante. where it exists, is altogether independent (0) Alluxntddy v. Bmham (1878) 4 of contract. Cal. HO. (e) See noto (,-), last page. (//) Puxi v. Malt (idea Prasad (1880) 3 (d) Mahomed Sultan Sahib v. Horace All. 122. Robinson (1907) 30 Mad. 543. (<) Debenliam v. Mellon, 6 App. Ca. at (e) See note (fi), above. See also p. 31 (Lord Selborne) Xathubhai v. Javher (1876) 1 Bom.' 121, AUTHORITY OF AGENT. 523 ^ ordinarily given by husband to wife" (k), including authority to pledge his credit to a reasonable extent and in a reasonable manner for ordinary household expenses. Where such authority exists, it can be revoked ; or its existence may be negatived by the husband supplying the wife with an adequate allowance of ready money () Watteau v. Fenwick [1893] 1 Q. B. (x) Brooks v Hassall (1883) 49 L.T. 569. 346. (y) Brady v. Todd (1861) 9 C. B. N. S. (tf) It is not approved by Lord Lindley, 592. Partnership, 134, note, and see L. Q. E. ix. (z) Pape v. Westacott [1894] 1 Q. 15. 111. 272 ; Blumberg v. Life Interest*, etc., Cor (r) This condition was satisfied in poration [189SJ 1 Ch. 27; Iline v. S. S Edmunds v. Bushell (1865) L. K. 1 Q. B. Ins. Syndicate (1895) 72 L. T. 79 (policy 97, which Watteau v. Fenwick professed broker no authority to take bill o to follow. exchange in payment). (.<) Ff.nn v. Harrison (1791) 3 T. R. (a) Bridges v. Garrctt (1870) L. R. 5 757, 4 T. R. 177. C. P. 451. (0 Mullens v. Miller (1882) 22 Ch. D. (2>) Williams v. Eeans (1866) L. R. 1 194. Q. B. 352 (auctioneer no authority to take (u) Howard v. Sheward (1866) L. R. 2 bill of exchange in payment of deposit.) C. P. 148. (c) Underwood v. Nicholls (1855) 17 CONSTRUCTION OF POWERS OF ATTORNEY. 525 Construction of Powers of Attorney. A power of attorney is a formal instrument (generally executed under seal in England, but not in India outside the Presidency towns) by which authority is conferred on an agent. Such an instrument^ is construed strictly, and confers only such authority as is given expressly or by necessary implication (d). One of the most important rules for the construction of a power of attorney is that regard must be had to the recitals, which, as showing the scope and object of the power, will control all general terms in the operative part of the instrument. Thus, where it was recited that the principal was going abroad, and the operative part gave authority in general terms, it was held that the authority continued only during the principal's absence (e). Another rule is that where special powers are followed by general words, the general words are to be construed as limited to what is necessary for the proper exercise of the special powers, and as enlarging those powers only when necessary for the carrying out of the purposes for which the authority is given (/). There are many reported cases illustrating this rule, of which the following are examples. A power of attorney was given by a principal, who carried on business in Australia, to purchase goods either for cash or on credit in connection with the business, and when necessary in connection with any such purchases, or with the business, to make, draw, sign, accept, or indorse any bills of exchange or promissory notes which should be requisite or proper, and it was held that the power gave no authority to borrow money, and the principal was therefore not liable in bills of exchange given in respect of a loan (#). Where power was given to demand and receive all moneys due to the principal on any account whatsoever, to use all means for the recovery thereof, to appoint attorneys to bring actions, and revoke such appoint- ments, and to do all other business, it was held that the words " all other business " must be construed to mean all other business necessary for the recovery of the moneys, and that the agent had no authority to indorse a S. 188. C. B. 239 ; Pearson v. Scott (1878) 9 Ch. Div. 198 ; Sweeting v. Pearce (1859) 7 C. B. N. S. 449 (custom for policy brokers to receive payment from underwriters by way of set-off). (d) Bryant v. La lianque du Peuple [1893] A. C. 170 ; Jonmenjoy Coondoo v. Watson (1884) 9 App. Cas. 561 (a power from time to time to negotiate, make sale, dispose of, assign and transfer gives no authority to pledge). Cp. Banlt of Bengal v. Macleod (1849) 5 M. I. A. 1, 83 B. E. 1 ; Banlt of Bengal v. Fagan (1849) 5 M. I. A. 27, 83 E. E. 15 (a power " to sell, indorse and assign " does authorise an indorsement to a bank as security for a loan). 00 Danly v. Coutts (1885) 29 Ch. Div. 500. (/) Attwood v. Munnlngs (1827) 7 B. & C. 278, 31 E. E. 194 ; Harper v. Godsell (1870) L. E. 5 Q. B. 422 ; Bryant v. La Banque du Peuple [1893] A. C. 170. (g) Jacobs v. Morris [1902] 1 Ch. 816. 526 THE INDIAN CONTRACT ACT. S. 188. bill received by him in pursuance of the power (A). Where an executor gave a power of attorney to transact in his name all the affairs of the testator, it was held that the agent had no authority to accept a bill of exchange in the name of the executor so as to bind him personally (t). A power of attorney is, however, construed as including all incidental powers necessary for carrying out its object effectively (&). A power to commence and carry on all actions, suits, and other proceedings touching anything in which the principal might be in anywise concerned was held to authorise the signature by the agent on behalf of the principal of a bankruptcy petition against a debtor of the principal (). See Powers of Attorneys Act, VII. of 1882. Authority to do every lawful thing necessary for the purpose. The authority conferred by this section to do things necessary for a business may be excluded either expressly or impliedly by the terms of the agency. Thus where A. appointed B. manager of his silk factory, and executed to him a power of attorney specifying his powers and authority, but the document gave no authority to B. to borrow, it was held that A. was not liable for money borrowed by B. as manager and attorney of A. " Sections 187 and 188 . . . would no doubt authorise a manager to borrow if necessary ; but such general provisions are subject to modifica- tions in particular cases, and in this case they were so modified, for the manager had been allowed no power to borrow '' (in). Authority of Counsel, Attorney, and Pleader. Though the relation between a client and an attorney or pleader is that of principal and agent, it is not so in the case of counsel (n). Nevertheless counsel, unless his authority to act for his client is revoked and such revocation is notified to the opposite side, has, without need of further authority, full power to compromise a case on behalf of his client. " Counsel is clothed by his retainer with complete authority over the suit, the mode of conducting it, and all that is incident to it, and this is understood by the opposite party" (o). (/t) Hogg v. Snaith (1808) 1 Taunt. (7) In re Wallace (1884) 14 Q. B. Div. 347, 9 U. R. 788. Similar cases : Esdaile 22. v. La Nauze (1840) 1 Y. & C. 394, 41 (m) Ferguson v. Urn Chand Boid (1905) R. R. 299 ; Hay v. Goldsmidt (1804) 1 33 Cal. 343. Taunt. 349, 9 R. R. 790 ; Murray v. East () Per Lord Esher, M.R., in Matt/tews India Co. (1821) 5 B. & Aid. 204, 24 R. R. v. Minister (1887) 20 Q. B. Div. 141, 142. 325. (fl) Bowen, L.J., 20 Q. B. Div. at p. 144 ; (i) Gardner v. BailUe (1796) 6 T. R. Jang Bahadur v. Sftankar Itai (1890) 13 591, 3 R. R. 531, 538. All. 272 ; Nundo Lai v. Xistarini (1900) (A) Howard v. Baillie (1796) 2 H. Bl. 27 Cal. 428 ; Jagannathdas v. Eamdas 618, 3 R. R. 531 ; Willis v. Palmer (1860) (1870) 7 B. H. C. 0. C. 79. See Garrison 7 C. B. N. S. 340 ; Routh v. Macmillan v. RoUrigues (1886) 13 Cal. 115, where the (1863) 2 H. & C. 750; Ex parte Frampton Court set aside a compromise made by (1859) 1 D. F. & J. 263. counsel for the plaintiff, and against her AUTHORITY OF COUNSEL, ETC. 527 But this authority does not extend to a compromise of matters outside the S. 188. scope of the particular case in which he is retained (p), nor to referring the case itself to arbitration on terms different from those which the client has authorised (g). An attorney is entitled in the exercise of his discretion to enter into a compromise, if he does so in a reasonable, skilful, and bonajide manner, provided that his client has given him no express directions to the contrary (r). In the only Indian case on the subject, the Court found that the client had authorised his attorney to compromise, and that the compromise was reasonable and proper (s). The case of a pleader stands on a different footing, and he cannot enter into a compromise on behalf of his client without his express authority (t). Authority of Factor. A factor to whom goods are entrusted for sale has authority to sell them in his own name (t*), on reasonable credit (a"), at such times and at such prices as in his discretion he thinks best (y} ; to receive payment of the price where he sells them in his own name (z) ; and to warrant the goods sold, if in the ordinary course of business it is usual to warrant that particular kind of goods (a). But he has no implied authority to barter the goods (6), nor to delegate his authority, even if acting under a del credere commission (c). Authority of Broker. A broker authorised to sell goods has implied authority to sell on reasonable credit (d) ; to receive payment of the price if he does not disclose his principal (e) ; and to act on the usages and regulations of the market in which he deals, except so far as such usages or regulations are unlawful or unreasonable (/). A usage which, by express prohibition, the consent decree p ^gg 7 R R 815. not having been sealed, and the plaintiff (y) Smart V- Bandars (1846) 3 C. B. having notified her dissent before the ggQ 71 R R 334 decree was drawn up. (?) Drlakwater v. Goodwin (1775) (j/) N undo Lai v. Kiistarini (1900) 27 Cowp. 251. Cal - 428 - (a) Dingle v. Hare (1859) 7 C. B. N. S. (if) Neale v. Gordon Lennox [1902] 145 A - - 465 - (&) Ouerreiro v. Peile (1820) 3 B. & (r) Fray v. Voulet (1859) 1 E. & E. Ald> 616) 2 2 R. R. 500. 839 ; Prestwich v. Poley (1865) 18 C. B. ^ Cockran v. Irlam (1813) 2 M. & S. N. S. 806 (authority of a managing clerk 301, 15 R. R. 257. to compromise). ( Boor man v. Brown (1842) 3 Q. B. (>) Jagannathdas v. Eamdas (1870) 7 511, 61 R. R. 287. B. H. C. 0. C. 79. (e~) Campbell v. Hassel (1816) 1 Stark. (0 Jagapati v. Ekambara (1897) 21 233. Mad - 274. (/) Cropper v. Cook (1868) L. R. 3 C. P. 00 Baring v. Corrie (1818) 2 B. & Aid. 194 ; Robinson v. Mollett (1874) L. R. 7 137, 20 R.R. 383 ; ExparteDixon (1876) H. L. 802 ; Button v. Tatham (1839) 10 4 Ch. Div. 133. A. & E. 27, 50 R. R. 312. (.) Hougkton\. Matthews (1803) 3 B. & 528 THE INDIAN CONTRACT ACT. S. 188. converting the broker into a principal, changes the intrinsic nature of the contract of agency is regarded as unreasonable (y). He has no implied authority to cancel (A) or vary (i) contracts made by him ; nor to receive payment of the price of goods sold on behalf of a disclosed principal () ; nor, even when the principal is undisclosed, has he implied authority to receive payment otherwise than in accordance with the terms of the contract of sale (I). A broker has no implied power to delegate his authority even if acting under a del credere commission (m). A policy broker authorised to subscribe policies on behalf of an under- writer has implied authority to adjust a loss arising under a policy (n) and to refer a dispute about such a loss to arbitration (o). But he has no implied authority to pay total or partial losses on behalf of the under- writer (p). Nor has a policy broker implied authority to cancel contracts made by him (q) ; or to receive payment from underwriters of a sum due under a policy by bill of exchange (r), or by way of set-off, even if there is a custom by which a set-off is considered equivalent to payment as between brokers and underwriters, unless the principal had notice of the custom and agreed to be bound by it at the time when he authorised the broker to receive payment (s). Authority of Auctioneer. An auctioneer has implied authority to sign a contract on behalf of both buyer and seller (<), an authority which does not, however, extend to his clerk (u). The implied authority of an auctioneer to sign on behalf of the buyer does not, however, extend to a sale of unsold lots by private contract subsequently to the sale by auction (#). An auctioneer has no implied authority to take a bill of exchange in (g) Robinson v. Mollett (1874) L. R. 7 (?) Xenos v. Wicltham (1866) L. R. 2 H. L. 802. H. L. 296. (//) Xenos v. Wickham (1866) L. R. 2 (r) Him v. S.S. Insurance Syndicate H. L. 296. (1895) 72 L. T. 79. (i) Blackburnv. Scholes (\810~) 2 Camp. (*) Sweeting v. Pearce (1859) 7 C. B. 343, 11 R. R. 723. N. S. 449 ; Bartlett v. Pentland (1830) 10 (k) Linck v. Jameson (1886) 2 T. L. R. B. & C. 760, 34 R. R. 560 ; Scott v. Ireing 206. (1830) 1 B. & Ad. 605, 35 R. R. 396. (0 Catterallv.Hindle (1867) L. R. 2 (f) Emmet-son v. Heelis (1809) 2 Taunt. C. P. 368. 38, 11 R. R. 520 ; White v. Pi-odor (1811) (;) Cocltrau v. L-lam (1813) 2 M. & S. 4 Taunt. 209, 13 R. R. 580. But see 301, 15 R. R. 257 ; Henderson v. Same- Bartlett v. Purnell (1836) 4 A. & E. 792, well (1827) 1 Y. & J. 387, 30 R. R. 799. 43 R. R. 484. (n) Richardson v. Anderson (1805) 1 (u) Bell v. Balls [1897] 1 Ch. 663. Camp. 43 n., 10 R. R. 628 n. Cjt. Sims v. Land ray [1894] 2 Ch. 318. (o) GoodsoH v. Brooke (1815) 4 Camp. (a-) Mews v. Can- (1856) 1 H. & N. 163. 484. (j>) Bell v. Auldjo (1784) 4 Doug. 48. AUTHORITY OF SHIPMASTER. 629 payment of the deposit, or of the price of goods sold, though it is provided S. 188. by the conditions of sale that the price shall be paid to him (y) ; but he may take a cheque in payment of the deposit according to the usual custom (z). Authority to sell by auction does not imply any authority to sell by private contract, in the event of the public sale proving abortive, though the auctioneer may be offered a price in excess of the reserve (a). Nor has an auctioneer implied authority to rescind a contract of sale made by him (6), or warrant goods sold (c) ; nor to deliver goods sold except on payment of the price, or allow the buyer to set off a debt due to him from the seller (d). Authority of Shipmaster. The extent of a shipmaster's authority to bind his principals personally by contract (e), or to sell or hypothecate the ship or cargo (/), is governed by the law of the flag, i.e., by the law of the country to which the ship belongs. Thus, if the master of an Italian ship give a bond hypothecating an English cargo under circumstances which according to Italian law do, but according to English law do not, justify the hypothecation, the bond will be held valid, and will be enforced by the English Courts () Nelson v. Aldridge (1818) 2 Stark. (1851) 6 Ex. 886, 86 R. R. 634. 435, 20 R. R. 709. (K) Wellfield v. Adamson (1884) 5 Asp. (c) Payne v. Leconfield (1882) 51 L. J. M. C. 214. Q. B. 642. (Z) The Eenpor (1883) 8 P. D. 115 ; (d) Brown v. Staton (1816) 2 Chit. 353, The Inchmaree [1899] P. 111. Unreason- 23 R. R. 750. able or inequitable agreements for towage (e) Lloyd v. Guilert (1865) 6 B. & S. or salvage services will not be enforced : 100, 120. The Medina (1876) 2 P. Div. 5. And a (/) The Karnak (1869) L. R. 2 P. C. salvage agreement made by the master is 505 ; The August [1891] P. 328. only binding to the extent of the value of (), directors of com- panies (q), brokers (r), and other agents in whom confidence is reposed have, generally speaking, no power to delegate their authority. "But the exigencies of business do from time to time render necessary the carrying out of the instructions of a principal by a person other than the agent originally instructed for the purpose, and where that is the case, the reason of the thing requires that the rule should be relaxed." And " an authority to the effect referred to may and should be implied where from the conduct of the parties to the original contract of agency, the usage of trade, or the nature of the particular business which is the subject of the agency, it may be reasonably presumed that the parties to the contract originally intended that such authority should exist, or where, in the course of the employment, unforeseen emergencies arise which impose upon the agent the necessity of employing a substitute " (s). So it is " where a shipowner employs an agent for the purpose of effectuating a sale of a ship at any port where the ship may from time to time in the course of its employment under charter happen to be " (s), for it is obvious that the agent cannot himself be prepared to do the business at every such port. Authority to delegate is implied whenever the act to be done by the sub- agent is purely ministerial, and does not involve the exercise of any discretion (i). In some cases the custom of trade justifies the delegation of special branches of work. Thus it has been found to be a usage of trade for architects and builders to have the quantities taken out from their designs by surveyors, who are more expert in that work, for the purpose of enabling proper estimates to be made ; and the surveyor can sue the architect's employer for his charges (u). O) Hell v. Sails [1897] 1 Ch. 663, 6G9. Y. & J. 387, 30 R. R. 799. (o) Coles v. T.ecotkicU (1801) 9 Ves. (*) Be Butsche v. Alt (1878) 8 Ch. Div. 234, 7 R. R. 107. 286, 310,311. (]>) Cockran v. Irlam (1813) 2 M. & S. (0 Ex parte Birmingham Banking Co. 301, 15 R. R. 257. (1868) L. R. 3 Ch. 461. (CL) In re Leeds Banking Co. (1866) (M) Moon v. Witney Union (1837) 3 L. R. 1 Ch. 561. Bing. N. C. 814, 43 R. R. 802. (/) Henderson v. Barnewell (1827) 1 584 THE INDIAN CONTRACT ACT Ss - f 191. A " sub-agent " is a person employed by, and "Sub-agent" acting under the control of, the original agent in the business of the agency. The relation of the sub-agent to the original jigent is, as between themselves, that of agent to principal. " It may be generally stated that, where agents employ sub agents in the business of the agency, the latter are clothed with precisely the same rights, and incur precisely the same obligations, and are bound to the same duties, in regard to their immediate employers, as if they were the sole and real principals " : S. A. 386. In the three next following sections the Act has defined, in accordance with settled law, the relations of the ultimate principal to the sub-agent in different cases. 192. Where a sub-agent is properly appointed, the Representation principal is, so far as regards third persons, age P n1p C roperiy 8ub " represented by the sub-agent, and is bound by appointed. anc | reS p 0ns ikl e f or frjg ac t Sj ag jf he were an agent originally appointed by the principal. Agent's responsi- ^h 6 agent is responsible to the principal bilityforsub-agent. for ^ ^ Qf ^ sub . agent . Sub-agent's The sub-agent is responsible for his acts responsibility. ^ fo e agent, but not to the principal, except in case of fraud or wilful wrong. Where authority to appoint a sub-agent in the nature of a substitute for the first agent " exists " either by agreement or as implied in the nature of the business " and is duly exercised, privity of contract arises between the principal and the substitute, and the latter becomes as responsible to the former for the due discharge of the duties which his employment casts upon him, as if he had been appointed agent by the principal himself" (x). This is the class of cases contemplated in s. 194. Otherwise the sub-agent looks to and is controlled by the agent who appointed him, and is not under any contract with the principal. If money due to A. is paid to P., who is Z.'s servant, Z. having authority from A. to collect it, P. is account- able only to Z., and A. cannot recover the money direct from P. (y). But a sub-agent is accountable to the principal for a secret commission improperly received by him (z). (a-) De Bussche v. Alt (1878) 8 Ch. Div. Ad. 354, 37 R. R. 448. 286, 311. (:) Powell v. Jones [190S] 1 K. B. 11, (y) Stephens v. Uadcock (1832) 3 B. & C. A. AUTHORITY AND LIABILITY OF SUB-AGENT. 535 And a sub-agent who does not know that his employer is an agent is Ss. entitled to the same rights as any other contracting party dealing with an 192, 193. undisclosed principal (see ss. 231, 232, pp. 593 596, below). " If A. employs B. as his agent to make any contract for him, or to receive money for him, and B. makes a contract with C., or employs C. as his agent, if B. is a person who would be reasonably supposed to be acting as a principal, and is not known or suspected by C. to be acting as an agent for any one, A. cannot make a demand against C. without the latter being entitled to stand in the same position as if B. had in fact been a principal. If A. has allowed his agent B. to appear in the character of a principal he must take the consequences " (a). Accordingly where goods consigned have been sold in good faith by a sub-agent appointed by the consignee, and the proceeds have been brought into account between the consignee and the sub-agent, the latter is not liable to account to the consignor. His account with the consignee cannot be interfered with by the consignee's principal except on the ground of bad faith (b). 193. Where an agent, without having authority to do Agent's responsi- so > nas appointed a person to act as a sub- appo^ted^ithour a g en *> the agent stands towards such person authority. j n ^ ne re ] a tion of a principal to an agent, and is responsible for his acts both to the principal and to third persons ; the principal is not represented by or responsible for the acts of the person so employed, nor is that person responsible to the principal. P If the sub-agent purports to act in the name of the ultimate principal, that principal may adopt his acts by ratification, as he might adopt acts purporting to be done on his behalf by any other person (ss. 196 200, pp. 537 543, below). But it is conceived that, if a sub-agent acts in his own name or in that of the agent who has taken on himself without authority to delegate to him business which is in fact the principal's, the acts so done cannot be ratified by the principal. A person to whom a trust has been improperly delegated is not an agent of the beneficiaries, but he is not the less liable to account to them, (a) Bowen, L.J.,in Montagu v. Forwood 7 Q. B. Div. 374. [1893] 2Q. B. 350.355. Cp. New Zealand (V) Peacock v. Baljnath (1891) 18 Cal. and Australian Land Co. v. Watson (1881) 573, 613, L. 11. 18 lud. Ap. 78. 536 THE INDIAN CONTRACT ACT. Ss. independently of agency, for trust property which has come to his 193,194. hands (c). 194. Where an agent, holding an express or implied authority to name another person to act for the Relation between principal and per- principal in the business of the agency, has son duly appointed by agent to act m named another person accordingly, such business of agency. . person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him. Illustrations. (a) A. directs B., his solicitor, to sell his estate by auction, and to employ an auctioneer for the purpose. B. names C., an auctioneer, to conduct the sale. 0. is not a sub-agent, hut is A.'s agent for the conduct of the sale. (b) A. authorises B., a merchant in Calcutta, to recover the moneys due to A. from C. & Co. B. instructs D., a solicitor, to take legal pro- ceedings against C. & Co. for the recovery of the money. D. is not a sub- agent, but is solicitor for A. In such cases as are put in the illustrations B., as between A. and the auctioneer or solicitor, is treated as merely the messenger of A.'s direct authority. This section apparently means to draw a clearly marked line between an ordinary sub-agent and a person who is put in relation with the principal, a " substitute " as he is called in a passage already quoted above () I nine v. Union Banlt of Australia (A) lb., head-note. (1877) 3 Cal. 280, 285 ; L. R. 4 Ind. Ap. (t) Raja Mai Bhagwat Dayal Singh v. 86 ; 2 App. Ca. 366. Debi Dayal Sahu (1908) 12 C. W. N. 393, (/>) Kelner v. Baxter (1866) L. R. 2 408, L. R. 35 Ind. Ap. 48, 58. C. P. 174, 185. (m) Per Cur. in Shidd/ieshvar v. Ram- (#) Empress Engineering Co. (1880) 16 chandrarav (1882) 6 Bom. 463, 466. -Ch. Div. 125; Ganesh Flour Mills Co. v. () Keighley, Maxted fy Co. v. Durant Puran Mai (1905) Punj. Rec. no. 2. [1901] A. C. 240. The decision of the (>) DUUns v. Dibbins [1896] 2 Ch. 348. C. A., which the H. L. reversed (see RATIFICATION OF UNAUTHORISED ACTS. 539 owner of specified property or the like. A man may effect an insurance S. 196. on behalf of all persons interested, and any such person may adopt the contract of insurance for his own share by ratification (s). A bailiff may receive the rent of land on behalf of the unknown heirs of the last owner in possession, and those heirs, when their title is ascertained, can ratify his acts (). " Acts done without knowledge or authority." An act done by an agent in excess of his authority may also be ratified (M). But "there is a wide distinction between ratifying a particular act which has been done in excess of authority and conferring a general power to do similar acts in future." Therefore the ratification by a company of certain acts done by its directors in excess of the authority given to them by the articles of the company does not extend the aiithority of the directors so as to authorise them to do similar acts in future (x). Retrospective effect. Ratification, if effective at all, relates back to the date of the act ratified. If an action is brought in a man's name without his knowledge, he may adopt the proceedings and make them good at any time before trial (y). The rule goes so far that if A. makes an offer to B. which Z. accepts in B.'s name without authority, and B. afterwards ratifies the acceptance, an attempted revocation of the offer by A. in the time between Z.'s acceptance and B.'s ratification is inoperative (2). So long as the professed agent purports to act on behalf of the principal, it is immaterial whether in his own mind he intends the principal's benefit or not, and what his real motive and intention may be ; nor does it make any difference if the third party discovers before ratification that the agent meant to keep the contract for himself (a). In fact, the third party gets by the ratification exactly what he bargained for. But if Z. pays money to B. as in satisfaction of A.'s debt, and B. after- wards, discovering that Z. had no authority, returns him the money by (*) Ilagedorn v. Olicersim (1814) 2 M. struments, and the most plausible form of & S. 485, 15 R. R. 317. And such ratifi- the argument for the defence was that the cation is good even after known loss : plaintiff was not the holder of the instru- Williams v. North China Insurance Co. merits at the time of suing. (1876) 1 C. P. Div. 757. (z) Bolton Partners v. Lambert (1889^ (t] Lycll v.Kennedy (1889) 14App. Ca. 41 Ch. Div. 295. This decision has been 437, 456. freely criticised, but for the present (w) Secretary of State v. Kamachee remains authoritative. It is open to lioi/e (1859) 7 M. I. A. 476. reconsideration in a Court of last resort : (#) Irvine v. Union Bank of Australia see the judgment of the Judicial Com- (1877) 3 Cal. 280, 287 ; L. R. 4 Incl. Ap. mittee in Fleming v.Banlt of New Zealand 86 ; 2 App. Ca. 366, 375. [1'JOO] A. C. 577, 587. (y) Ancona v. Mtirlts (1862) 7 H. & N. () Re Tledemann and Ledermann 086. The action was on negotiable in- Fibres [1899] 2 Q. B. 66. 540 THE INDIAN CONTRACT ACT. S. 196. agreement between them, A. can no longer adopt the payment and rely on it as a discharge. A man is not bound to accept payment of a debt, or satisfaction of any other obligation, from a stranger to the contract, though, if B. had accepted the payment with knowledge of Z.'s want of authority, or acquiesced in it after he obtained that knowledge, he would have been estopped from denying Z.'s authority as against A. (b). What acts cannot be ratified. A transaction which is void db initio cannot be ratified (c). This is illustrated in England by a line of cases in company law marking the distinction between irregularities capable of being made good if the act is ratified by a general meeting, or the whole body of shareholders, and acts not within the company's objects as defined by its original constitution, and therefore incapable of being made binding on the company by any ordinary means known to the law (d). It is not clear whether this rule extends to the case of a forged signature so as to prevent the person whose signature has been forged from adopting the instrument even for civil purposes (e). That such adoption would not relieve the forger from criminal liability is admitted. In any case it would seem that there is no question of agency unless the offender purports to sign by procuration. It is beyond our scope to consider under what conditions a man may be estopped by his own words or conduct, apart from agency or ratification, from denying that a certain signature was his. Agents of Government. Acts done by public servants in the name of the Crown, or the Government of India, may be ratified by subsequent approval in much the same way as private transactions (see Secretary of State v. Kamachee Boye(f) and Collector of Masitlipatam v. Cavnly Vencata (g} ). In these cases the effect may not be to create legal duties, but, where the acts in question are of the kind known as " acts of State," to preclude courts of law from entertaining any claim founded upon them (A). Such acts are political, and outside the scope of municipal law, and cannot, in ordinary circumstances, occur within the jurisdiction. (V) Walter v. James (1871) L. R. 6 Ex. did not create a cause of action : Brook v. 124. The language of Kelly, C.B., about Hook, L. R. 6 Ex. 89. Ton years later " mistake in fact " is not incorrect, but Lord Blackburn expressed a decided also not luminous. opinion that it would : McKcnzie v. O) Mauji Ram v. Tara Singh (1881) British Linen Co., 6 App. Ca. 82, 99. 3 All. 852 (not an ordinary case of agency, (/) (1859) 7 M. I. A. 476. but the principle is the same). (0) (1860) 8 M. I. A. 529, 554. (d) See Pollock on Contract, Appendix, (7t) Bunm v. De.nman (1847) 2 Ex. 167 ; Note D. see more in Pollock on Torts, 8th ed. 00 In 1871 the majority of the Court p. 111. of Exchequer held that such an adoption RATIFICATION HOW MADE. 541 197. Eatification may be expressed or may be implied Ss. Ratification may m the conduct of the person on whose behalf 197> 1 tlie acts are done. Illustrations. (a) A., without authority, buys goods for B. Afterwards B. sells them to C. on his own account. B.'s conduct implies a ratification of the purchase made for him by A. (b) A., without B.'s authority, lends B.'s money to C. After- wards B. accepts interest on the money from 0. B.'s conduct implies a ratification of the loan. Assent to an act done on one's behalf, like consent to an agreement, may be conveyed otherwise than in words (cp. s. 9, p. 50, above) ; and taking the benefit of the transaction is the strongest, as it is the most usual, evidence of tacit adoption. Accepting the results of the agent's proceeding, whether obviously beneficial to the principal or not, will have the same effect. Where an agent, without authority to do so, referred certain matters to arbitration, and the principal, after knowledge of the arbitration proceedings, acquiesced in them and did not raise any objection thereto, it was held that his conduct amounted to a ratification of the reference (i). 198. No valid ratification can be made Knowledge requisite for valid by a person whose knowledge of the facts of ratification. . . the case is materially detective. English authority is to the effect that a principal is not liable for excessive or irregular execution of his authority (nor a fortiori for a wholly unauthorised act done on his behalf) unless he ratifies the act with knowledge of the irregularity, or shows an intention " to take upon himself, without inquiry, the risk of any irregularity " (&). More lately the Judicial Committee laid down in general terms that " acquiescence and ratification must be founded on a full knowledge of the facts, and further it must be in relation to a transaction which may be valid in itself and not illegal, and to which effect may be given as against the party by his acquiescence in and adoption of the transaction"^). The two latter (i) Saturjit Pei-tap Bahadoor v. Dulhin Banque d'Epargne, etc. (1887) 13 App. Ca. Gulab Kocr (1897) 24 Cal. 469. 111. The appeal was from the Province (k) Lewis v. Read (1845) 13 M. & W. of Quebec, but the principle is one of 834, 67 R. R. 828. universal jurisprudence. (/) La Banqne Jacques Cartier v. La 542 THE INDIAN CONTRACT ACT. Ss. conditions might perhaps have been more clearly expressed. Still more 198 200. lately the Court of Appeal in England has said : "To constitute a binding adoption of acts a priori unauthorised these conditions must exist: (1) the acts must have been done for and in the name of the supposed principal, and (2) there must be full knowledge of what those acts were, or such an unqualified adoption that the inference may properly be drawn that the principal intended to take upon himself the responsibility for such acts, whatever they were." Reluctant ratification by a solicitor of an un- authorised use of his name which is represented as merely formal, and at the time reasonably appears so, will not make him, still less his firm, liable for the loss caused to third persons by money having been taken out of Court under the assumed authority and afterwards misapplied (m). The Act does not expressly deal with the possible case of the principal deliberately waiving inquiry so as to make the agent's act his own at all hazards. Such cases fall under the general rule that a free agent may waive a legal advantage if he thinks fit, and there is no reason to suppose that the English authorities would not be followed. Effect of ratify- 199. A person ratifying any unauthorised ac! ng of a transaction. transaction of which such act formed a part. It is obvious that a man cannot at his own choice ratify part of a transaction and repudiate the rest (n). The only possible exception is in the case of the part repudiated being wholly for the principal's benefit, which is not likely to occur. The general rule is that, " where a ratifica- tion is established as to a part, it operates as a confirmation of the whole of that particular transaction of the agent " : S. A. 250. 200. An act done by one person on behalf of another, Ratification of without such other person's authority, which, crnniunj s u e r d e act if done with authority, would have the effect third person. O f subjecting a third person to damages, or of terminating any right or interest of a third person, cannot, by ratification, be made to have such effect. Illustrations. (a) A., not being authorised thereto by B., demands, on behalf of B., the delivery of a chattel, the property of B., from C., who is in 0) llfarsh v. Joseph [1897] 1 Ch. 213, () See Keay v. FenwicTi (1876) 1 C. P. D. 246. 745 ( 753. Authority is really needless. REVOCATION OF AGENT'S AUTHORITY. 543 possession of it. This demand cannot be ratified by B., so as to make gs. C. liable for damages for his refusal to deliver (o). 200, 201. (b) A. holds a lease from B., terminable on three months' notice. C., an authorised person, gives notice of termination to A. The notice cannot be ratified by B., so as to be binding on A. (p). This is the converse of the principle that a voidable transaction cannot be rescinded to the prejudice of third persons' rights acquired under it in good faith. Rights of property cannot be changed retrospectively by ratification of an act inoperative at the time. The rule is also stated in the form that ratification, to make an act rightful which otherwise would be wrongful, must be at a time when the principal could still have lawfully done it himself (/). The ratification of a contract does not give the principal a right to sue for a breach committed prior to the ratification (r). Revocation of Authority. 201. An agency is terminated by the principal revoking Termination n ^ s authority ; or by the agent renouncing the of agency. business of the agency ; or by the business of the agency being completed ; or by either the principal or agent dying or becoming of unsound mind ; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors. This is English law, subject to the remark that there is very little authority as to the case of insanity, and it was formerly thought the better opinion that insanity of either principal or agent would determine the agency only if it had been judicially established by " inquisition " (s). But it seems the true general rule is " that, where such a change occurs as to the principal that he can no longer act for himself, the agent whom he has appointed can no longer act for him " (), though some learned persons consider it doubtful (u). (o) S. A. 247. Cp. Bird, v. Brown R. R. 752, from which this illustration (1850) 4 Ex. 786, where the act was appears to be simplified, stoppage in transit-, and the recognition (q) Bird v. Brown (1850) 4 Ex. 786. of the same rule in the House of Lords in (?) Kidderminster v. Hardwiclt (1873) Lyell v. Kennedy (1889) 14 App. Ca. 437, L. R. 9 Ex. 13. 461, 462. (*) Kent, Comm. ii. 645. (_p) Such a notice, in order to be good, () Brett, L.J., in Drew v. Nunn (1879) must be binding on all parties concerned 4 Q. B. Div. 661, 666. at the time when it is given: Right <$' (u) " It is still open to question whether Fisher v. Cufbell (1804) 5 East, 491, 7 insanity annuls an authority properly 544 THE INDIAN CONTRACT ACT. Ss. The present section has, in any case, made the law clear in India. We 201, 202. have to read it with the following ones to 210 inclusive, which modify its effect in various ways. Completion of business of agency. Where any agent for the sale of goods receives the price, the agency does not terminate on the sale of the goods, but continues until payment of the price to the principal. S. 218 (p. 566, below) provides " that an agent is bound to pay to his principal all sums received on his account. Clearly then the business does not terminate on receipt of the money by the agent, inasmuch as there is a subsequent obligation to account for the sums and to pay them " (). But the authority of an agent for sale to contract on the principal's behalf ceases as soon as the sale is completed. He has no power to alter the terms of the contract without fresh authority from the principal (y). Death of principal. A power of attorney to an agent to present a document for registration is revoked by the death of the principal. It was accordingly held by the Judicial Committee that where the principal died before the presentation, and the registrar, knowing of the principal's death, accepted and registered the document, the registration was invalid (?). Payment or act by attorney under power. S. 3 of the Powers of Attorney Act VII of 1882 provides that any person making or doing any payment or act in good faith, in pursuance of a power of attorney, shall not be liable in respect of the payment or act by reason that, before the payment or act, the donor of the power had died or become lunatic or insolvent, or had revoked the power, if the fact of the death, etc., was not at the time of the payment or act known to the person making or doing the same. 202. Where the agent has himself an interest in the property which forms the subject-matter of Termination of . agency, where the agency, the agency cannot, in the absence t- of an express contract, be terminated to the prejudice of such interest. Illustrations. (a) A. gives authority to B. to sell A.'s land, and to pay himself, out of the proceeds, the debts due to him from A. A. cannot revoke created while the principal was yet (y) Blackburn v. Scholes (1810) 2 sane" : Anson, p. 385. Camp. 343, 11 R. B. 723. And see Seton (IB) Baku Earn v. Ram Dayal (1890) v. Slade (1802) 7 Ves. 265, 276, 6 K. R. 124. 12 All. 541, followed in Fink v. Buldeo (z) Mujib-un-Nisxa v. Abdur Rahim Doss (1899) 26 Gal. 715, 724, 725. (1900) 23 All. 233, L. R. 28 Ind. Ap. 15. AUTHORITY COUPLED WITH INTEREST. 545 this authority, nor can it be terminated by his insanity or death. g, 202. [Gatusen v. Morton (1830) 10 B. & C. 731 ; 34 E. E. 558.] (b) A. consigns 1,000 bales of cotton to B., who has made advances to him on such cotton, and desires B. to sell the cotton, and to repay himself, out of the price, the amount of his own advances. A. cannot revoke this authority, nor is it terminated by his insanity or death: S. A. 371. Authority coupled with interest. In these cases the current phrase is that the agent's authority is " coupled with an interest." In England, how- ever, this does not seem to be quite accurate, unless it is understood that the word " coupled " implies, beyond the mere fact of the agent having an interest in the subject-matter, some specific connection between the autho- rity and the interest. The principle is thus stated : " that where an agreement is entered into on a sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the donee of the authority, such an authority is irrevocable " (a). In fact, the circumstances must be such that revocation of the authority would be a breach of faith against the agent. The language of this section is wider. Still there is not any evident intention to overrule the English decisions. In fact, illustration (b) supplies just the circumstances which, in a leading English case where the authority was held to be revocable, were wanting, namely, that the consignment is made after the factor's advances, and with an express request by the principal to repay himself out of the price of the goods. In that case the Court said : "We think this doctrine" i.e., the rule of the present section "applies only to cases where the authority is given for the purpose of being a security, or ... as a part of the security, not to cases where the authority is given independently, and the interest of the donee of the authority arises after- wards, and incidentally only ; as, for instance, in the present case . . . the goods are consigned to a factor for sale. This confers an implied aiithority to sell. Afterwards the factor makes advances. This is not an authority coupled with an interest, but an independent authority, and an interest subsequently arising. The making of such an advance may be a good con- sideration for an agreement that the authority to sell shall be no longer revocable ; but such an effect will not, we think, arise independently of agreement " (b). The material variation of the facts in this case which is given in illustration (b) does amount to evidence of agreement. Whether (a) Smart v. Sandars (1848) 5 C. B. at Ex. Ch. ; adopted by Lindley, L.J., in p. 917, approved in Taplin v. Florence CarmichaeVs Case [1896] 2 Ch. 643, 648. (1851) 10 C. B. 744, 758; repeated word (i) Smart v. Sandars (1848) 5 C. B. for word by Williams, J., in Clerk v. 895,918. And see Frith v. Frith [1906] Laurie (1857) 2 H. & N. 199, 200, in A. C. 254. i.e. 35 546 THE INDIAN CONTRACT ACT. S. 202. there is such an agreement in a particular case is a question of fact (c). Recent Indian decisions, as we shall immediately see, take the same line. The Act itself is, of course, the primary authority (d). A direction by A. to B. to receive income payable to A., and apply it towards discharge of A.'s debt to Z., is obviously not an authority coupled with an interest in B., whether the revocation of it would or would not be a breach of any contract between A. and Z. ; but in such circumstances loosely worded or ambiguous new instructions from A. to B. will not be readily construed as a revocation (e). A recent example of a transaction including such an agreement as the rule requires is that of an " underwriting contract " addressed to the vendor-promoter of a new company. Here we have a bargain by which, for valuable consideration in the form of commission, the underwriter agrees to take certain shares, and this he knows to be for the benefit of the promoter, who is to be paid out of money raised by the issue of shares, and in order to enable the promoter the better to secure the performance of the contract the underwriter authorises the promoter to apply for shares in his name, and expressly agrees not to revoke that authority. The authority is coupled with an interest, and an allotment of shares to the underwriter on the promoter's application makes him a member of the company notwith- standing an attempted revocation in the meantime (/). Indian authorities. The interest which an agent has in effecting a sale and the prospect of remuneration to arise therefrom do not constitute such an interest as would prevent the termination of the agency (g}. Upon the same principle, where an agent is appointed to collect rents, and his salary is agreed to be paid out of those rents, it does not give the agent an interest in the subject-matter of the agency within the meaning of this section (h). But where an agent is authorised to recover a sum of money due by a third party to the principal, and to pay himself, out of the amount so recovered, the debts due to him from the principal, the agent has an interest in the subject-matter of the agency, and the authority cannot be revoked (i). (c) De Comas v. Promt (1865) 3 Moo. 24 Bom. 403. P. C. (N. S.) 158. (A) Vislmucharya v. Ramchandra (d) See 17 Bom. at pp. 543, 545 ; 20 (1881) 5 Bom. 253. Mad. at p. 103. (i) Pestanji v. Matchett (1870) 7 (e) Clerk v. Laurie, 2 H. & N. 199, B. H. C. A. C. 10. See also Subrahmania argued mainly on the question whether v . Narayanan (1901) 24 Mad. 130, and the authority was revocable, but decided JagalJiai v.Rustamji (1885) 9 Bom. 311. on the ground that in any case there was Clerk v. Laurie, 2 H. & N. 199, cited nothing amounting to a revocation. above, would have resembled these cases (/) Carmleliael'it Case [1896] 2 Ch.643, if the debt which the banker was directed 647. to pay had been due to himself and not to (g) Lakhmicliand v. Chotooram (1900) a third person. AUTHORITY WHEN REVOCABLE. 547 Factors for Sale of Goods. The question has often arisen as to whether Ss. a factor who has made advances as against goods consigned to him for sale 202, 203. has such an interest in the goods consigned as to prevent the termination of his authority to sell. The result of the cases appears to be that the authority of a factor to sell is in its nature revocable, and the mere fact that advances have been made by him, whether at the time of his employ- ment as such or subsequently, cannot have the effect of altering the revocable nature of the authority to sell, unless there is an agreement express or implied between the parties that the authority shall not be revoked (&). Where the factor is expressly authorised to repay himself the advances out of the sale proceeds, as in illustration (b), he has an interest in the goods consigned to him for sale, and the authority to sell cannot be revoked. In such a case " an interest in the property " is expressly created. But the " interest" need not be so created, and it is enough to prevent the termination of the agency that the "interest" could be inferred from the language of the document and from the course of dealings between the parties. Thus where a factor who had made advances as against goods consigned to him for sale was authorised to sell them " at the best price obtainable," and in the event of a shortfall to draw on the consignor, it was held that this arrangement gave, an interest to the factor in the goods, and that the authority to sell could not be revoked (I). 203. The principal may, save as is otherwise provided by the last preceding section, revoke the When principal may revoke agent's authority given to his agent at any time authority. IP i i i i before the authority has been exercised so as to bind the principal [S. A. 465] . What amounts to exercise of authority. An agent authorised to purchase goods on behalf of his principal cannot be said to have exercised the authority so given to him " so as to bind the principal " if he merely appropriates to the principal a contract previously entered into by himself with a third party. Such an appropriation does not create a contractual relation with a third party, and the principal, therefore, may revoke the authority (m). Authority given to an auctioneer to sell goods by auction may be revoked at any time before the goods are knocked down to a purchaser (n), (It) Jafferllunj v. ChurlemoortU (1893) (/) LahJtmichand v. Cliotooram (1900) 17 Eom. 520, 542, citing De Comas v. 24 Bom. 403. 1'roxf, 3 Moo. P. C. 158, 179. () Warlow v. Harrison (1859) 1 E. & (I) Kondayya v. Narasvmlivlv, (1896) E. 309 ; In re Hare fy O'More's Contract 20 Mad. 97 [1901] 1 Ch. 93. 852 548 THE INDIAN CONTRACT ACT. Ss. and authority given to a policy broker to effect a policy at any time before 203, 204. the policy is executed so as to be legally binding (o). Authority to pay money in respect of an unlawful transaction may be revoked at any time before it has actually been paid, even if it has been credited in account (p). 204. The principal cannot revoke the authority given Revocation * his agent after the authority has been L^been^artfy 7 partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency. Illustrations. (a) A. authorises B. to buy 1,000 bales of cotton on account of A., and to pay for it out of A.'s money remaining in B.'s hands. B. buj r s 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A. cannot revoke B.'s authority so far as regards payment for the cotton. \_Cp. D. 17, 1, Mandati vel. contra. 15.] (b) A. authorises B. to buy 1,000 bales of cotton on account of A., and to pay for it out of A.'s moneys remaining in B.'s hands. B. buys 1,000 bales of cotton in A.'s name, and so as not to render himself personally liable for the price. A. can revoke B.'s authority to pay for the cotton. Authority partly exercised. The rule here laid down is connected with the principal's duty to indemnify the agent (s. 222, below). " If a principal employs an agent to do something which by law involves the agent in a legal liability " or even in a customary liability by reason of usage in that class of transactions known to both agent and principal " the principal cannot draw back and leave the agent to bear the liability at his own expense " ( so far as regards the agent, take authority takes effect before it becomes known to him, or, so ^lalotiSS A> ^ ar as re g ar ds third persons, before it becomes persons. known to them. Illustrations. (a) A. directs B. to sell goods for him, and agrees to give B. 5 per cent, commission on the price fetched by the goods. A. afterwards, by letter, revokes B.'s authority. B., after the letter is sent, but before he receives it, sells the goods for 100 rupees. The sale is binding on A., and B. is entitled to five rupees as his commission. (b) A., at Madras, by letter, directs B. to sell for him some cotton lying in a warehouse in Bombay, and afterwards, by letter, revokes his authority to sell, and directs B. to send the cotton to Madras. B., after receiving the second letter, enters into a contract with C., who knows of the first letter, but not of the second, for the sale to him of 00 Pricltett v. Badger (1856) 1 C. B. See the judgment of Willes, J. N. S. 296 ; Inclibald v. Western Neilgherry (x) Sristow v. Taylor (1817) 2 Stark. Coffee, etc., Co. (1864) 17 C. B. N. S. 733. 50, 19 R. R. 675. TERMINATION OF AUTHORITY. 551 the cotton. 0. pays B. the money, with which B. absconds. O.'s Ss. payment is good as against A. 208, 209. (c) A. directs B. , his agent, to pay certain money to 0. A. dies, and D. takes out probate to his will. B., after A.'s death, but before hearing of it, pays the money to 0. The payment is good as against D., the executor. Time from which revocation operates. " Revocation by the act of the principal takes effect as to the agent from the time when the revocation is made known to him ; and as to third persons when it is made known to them, and not before " : S. A. 470. Except as to illustration (c), which removes an anomaly, this section is in accordance with the common law. Where A. trades as B.'s agent with B.'s authority (even though the business be carried on in A.'s name, if the agency is known in fact), all parties with whom A. makes contracts in that business have a right to hold B. to them until B. gives notice to the world that A.'s authority is revoked ; and it makes no difference if in a particular case the agent intended to keep the contract on his own account (y). Illustration (c) follows the rule of the Roman law and systems derived from it against the English authorities, which are admitted to be unsatisfactory (2). If the authority of an agent to admit execution of a document is revoked before the registration thereof, but such revocation is not known either to the grantee of the document or the registering officer, the document is not invalidated, though it is registered by the agent after the revocation of his authority (a). 209. When an agency is terminated by the principal dying or becoming of unsound mind, the Agent's duty on termination of agent is bound to take, on behalf of the agency by princi- . . - pars death or representatives or his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him. See S. A. 491, 492. There does not seem to be any English authority. (y) Irueman v. Loder (1840) 11 A. & liable on implied warranty of authority. E. 589, 52 R. R. 451. See editor's note to S. C. in 62 R. R. 510. (z) In England, in such a case neither Nor can the agent recover agreed remu- the principal's estate (Blades v. Free neration from the principal's estate for (1829) 9 B. & C. 167, 32 R. R. 620) nor service in the business of the agency per- the agent, if acting in good faith, is liable formed after the principal's death : Cam- on the contract (Snwut v. Ilbery (1842) panari v. Woodburn (1854) 15 C. B. 400. 10 M. & W. 1, 11, 62 R. R. 510, 516), but (a) MoJwndra Natli v. Kail Pt-oshad whether the agent may not be (1902) 30 Gal. 265. 552 THE INDIAN CONTRACT ACT. Ss. 210. The termination of the authority of an agent ' causes the termination (subject to the rules of sub-agent's herein contained regarding the termination of an agent's authority) of the authority of all sub-agents appointed by him. As a general rule this is obvious. There may be cases where a substitute rather than a sub-agent has been appointed, and there appears by express agreement or by the nature of the case an intention that his authority shall not be determined when thalf of the original agent is revoked : S. A. 469. Agent's Duty to Principal. 211. An agent is bound to conduct the business of his principal according to the directions given by Agent's duty * in conducting the principal, or, in the absence of any such principal's business. . directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it. Illustrations. (a) A., an agent engaged in carrying on for B. a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investment. A. must make good to B. the interest usually obtained by such investments. (b) B., a broker, in whose business it is not the custom to sell on credit, sells goods of A. on credit to C., whose credit at the time was very high. C., before payment, becomes insolvent. B . must make good the loss to A. Additional Illustrations. (c) An agent, instructed to warehouse goods at a particular place, warehouses a portion of them at another place, where they are destroyed, without negligence. He is liable to the principal for the value of the goods destroyed. \Lilley v. DouUeday (1881) 7 Q. B. D. 510.] (d) An agent, instructed to insure goods, neglects to do so. He is liable to the principal for their value, in the event of their being lost. [Smith v. Lascelles (1788) 2 T. R. 187 ; 1 R. R. 457.] (e) A broker, entrusted with goods for sale, sells them by auction at an inadequate price, not having made an estimate of the value in accordance AGENT'S DUTY TO PRINCIPAL. 553 with the custom of the particular trade. He must make good the loss. S. 211. [Solomon v. Barker (1862) 2 F. & F. 926.] (f) An auctioneer, contrary to the usual custom, takes a bill of exchange in payment of the price of goods sold. He is liable to the principal for the amount of the bill in the event of its being dishonoured. [Ferrers v. Rolins (1835) 2 C. M. & R. 152.] Departure from Instructions. In Bostodc v. Jardine (b) the defen- dants were authorised to buy a certain quantity of cotton for the plaintiff. " Instead of complying with their instructions, they bought a much larger quantity for the plaintiff and divers other people," so that there was no contract on which the plaintiff could sue as principal. Accordingly, " though a contract was made, it was not the contract the plaintiff authorised the defendants to make," and the plaintiff was entitled to recover back a sum paid to the defendants on account of the purchase- money. In an old equity case where a landowner's steward was also lessee of part of the property, and in that capacity had made profitable arrangements with adjacent owners, it was held " that the benefit he had got as lessee by the use of the property should, upon reasonable terms, be acquired for his landlord and not for himself " (c). It is not an agent's duty to obey instructions which are unlawful. If, at a sale by auction without reserve, the auctioneer is instructed not to sell for less than a certain price, he is not liable to the principal for accepting the highest bonafide bid, though it may be lower than that price (d). "If any loss be sustained." Where an agent sells his principal's goods in breach of his duty below the limit placed upon them by the principal, the measure of damages is the actual loss which the principal has sustained, and not the difference between the price at which they are sold and the limit of price placed on the goods. Where no loss is suffered, the principal is entitled at least to nominal damages, the sale being wrongful (e). The measure of damages where an agent, who had been instructed not to part with the possession of certain goods until they were paid for, parted with them without payment, was held to be the value of the goods, the purchaser having failed to pay the price (/). As to the duty to account for profits, see s. 216 and commentary thereon. (&) (1865) 3 H. & C. 700. (e) Manchub/tai v. Tod (1894) 20 Bom. (c) Beaumont v. Boultbee (1802) 7 Ves. 633 ; Chelapathi v. Surayya (1902) 12 599, 608. M. L. J. 375. (d) Bexwell v. Christie (1776) Cowp. (/) Stearine Co. v. Heintzmann (1864) 395. 17 C. B. N. S. 56. 654 THE INDIAN CONTRACT ACT. S. 211. Custom of trade. According to the custom of trade in Bombay, when a merchant requests or authorises a firm to order and to buy and send goods to him from Europe, at a fixed price, net free godown, including duty, or free Bombay harbour, and no rate of remuneration is specifi- cally mentioned, the firm is not bound to account for the price at which the goods were sold to the firm by the manufacturer. And it does not make any difference that the firm receives commission or trade discount from the manufacturer, either with or without the knowledge of the merchant () Lee v. Walker (1872) L. R. 7 C. P. Bl. 159, 2 R. R. 750 ; Moffatt v. Bateman 121 ; Jenkins v. Betham (1855) 15 C. B. (1869) L. R. 3 P. C. 115 ; Giblin v. 168. McMullen (1869) L. R. 2 P. C. 317. (q) Orerend v. Gibb (1872) L. R. 5 (y) ChedwoHh v. Edwards (1802) 8 H. L. 480. Ves. 46, 6 R. R. 212. (/) Lagvnux Nitrate Co. v. Lagunas (z) Annoda Persad v. Dwarkanatft Syndicate [1899] 2 Ch. 392. (1881) 6 Cal. 754. See also Lawless v. (*) Agneuo v. Indian Carrying Co. Calcutta Landing and Shipping Co. (1881) (1865) 2 M. H. C. 449. 7 Cal. 627, 558 THE INDIAN CONTRACT ACT. Ss. If an agent neglects to keep proper accounts, everything consistent with 213 215. established facts will be presumed against him in the event of his being called upon for an account of the agency (a). The duty to account is owed by the agent to the principal, and not to other persons. Thus an agent appointed by the administrator of the estate of a deceased person to recover outstanding debts due to the estate is not liable to account on the contract of agency to the person entitled to the estate, and it makes no difference that representation was granted to the administrator as attorney of the mother and guardian of the person entitled to the estate (b). When a minor comes to Court to have an account taken as between himself and his agent, and it is found on taking that account that the agent has made certain advances to the guardian, and advances have been applied for the benefit of the minor, the -agent ought to be allowed these advances in taking the accounts. Here the plaintiff seeks relief from a Court administering equity, and he must do equity himself (c). As to the form of a suit for an account between a principal and an agent, see the undermentioned cases (d). A suit by a principal against his agent for an account, and also for recovery of money that may be found due from him, is governed by art. 89, sch. 11, of the Limitation Act(e). See also the commentary on s. 218, p. 566, post. 214. It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communi- Agent'sdutyto . . . communicate with eating with his principal, and in seeking to principal. . . obtain his instructions. There does not appear to be any reported authority in point on this section. Obviously the rule must be as stated. 215. If an agent deals on his own account in the Eight of princi- business of the agency, without first obtaining SaiT h on hlTown *ke consen * of h* 8 principal and acquainting account, in business bi m ^fo & n ma t e rial circumstances which of agency without principal's consent. nave come to his own knowledge on the (a) Gray v. Haig (1854) 20 Beav. 219. Cliandra Bay (1907) 34 Cal. 892. (V) Chidambaram Chettl v. Pichappa (d) Degamber v. Kallynath (1881) 7 Chetti (1907) 30 Mad. 243. The suit in Cal. 654 ; Hurrlnuth v. Krishna (1887) this case was founded on the contract of 14 Cal. 147. agency. 00 Shib Chandra Roy v. Chandra, (c) Surendra j\'ath SarTtar v. Atul Aarain Muherjee (1905) 32 Cal, 719. AGENT DEALING ON HIS OWN ACCOUNT. 559 subject, the principal may repudiate the transaction, if the S. 215. case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him. Illustrations. (a) A. directs B. to sell A.'s estate. B. buys the estate for himself in the name of C. A., on discovering that B. has bought the estate for himself, may repudiate the sale, if he can show that B. has dis- honestly concealed any material fact, or that the sale has been disadvantageous to him. (b) A. directs B. to sell A.'s estate. B., on looking over the estate before selling it, finds a mine on the estate which is unknown to A. B. informs A. that he wishes to buy the estate for himself, but conceals the discovery of the mine. A. allows B. to buy in ignorance of the existence of the mine. A., on discovering that B. knew of the mine at the time he bought the estate, may either repudiate or adopt the sale at his option. Authoritative illustrations of the principle here laid down might be multiplied almost indefinitely from the English reports. A few will suffice for all useful purposes. The kind of case given in illustration (a) is the most common subject of animadversion, but there is no doubt that the rule is general. " Where an agent employed to sell becomes himself the purchaser, he must show that this was with the knowledge and consent of his employer, or that the price paid was the full value of the property so purchased ; and this must be shown with the utmost clearness and beyond all reasonable doubt" (/). " It is an axiom of the law of principal and agent that a broker employed to sell cannot himself become the buyer, nor can a broker employed to buy become himself the seller, without distinct notice to the principal, so that the latter may object if he think proper " (g). For like reasons, an agent for sale or purchase must not act for the other party at the same time, or take a commission from him unknown to the principal (A). An agent must give his principal " the free and unbiassed use of his own discretion and judgment " (*'). (/) Lord Lyndhurst, Charter v. Tre- cipal not proved to have known it. See velyan (1844) 11 Cl. & F. at p. 732, 65 S. C. in H. L. (1874) L. R. 7 H. L. 802. R. R. at p. 315. (li) Grant \. Gold Exploration, etc., () Parker v.McKenna (1874) L. R. (?/) Salomans v. Pender(l 865)3 H. &C. 10 Ch. 96. 639. (q) Ib., note (;), above. i.e. 36 562 THE INDIAN CONTRACT ACT. S. 216. Knowledge of Principal. A transaction of this kind may be approved or ratified by the principal (2), but it must be upon full disclosure. It is not enough for the agent to tell the principal that he has some interest of his own. He must disclose all material facts, and be prepared to show that full information was given and the agreement made with perfect good faith. Notice sufficient to put the principal on inquiry will not do (a). Thus where an agent employed to buy goods sells his own goods to the principal at a price higher than the prevailing market rate, the principal is entitled to repudiate the transaction, and he is not bound by a ratification made in the absence of knowledge that the agent was selling his own goods and was charging him in excess of the market price (6). It is open to the principal whose agent has bargained for a secret profit or commission to adopt the transaction, if he thinks fit, for the purpose of suing the third party and recovering for himself the sum promised by him to the agent, or any part of it which the agent has not received (c). Profit not acquired in course of agency. It has been held by the Court of Appeal that an agent who, without disclosure, sells to his principal goods which were the property of the agent prior to the commencement of the agency is not, in the absence of misrepresentation (d), liable to account for the profit made by him or for the difference between the contract price and the market value, even if the remedy of rescission is not open to the principal owing to its having become impossible (e). This decision, though obviously open to criticism, has been approved by the Judicial Committee of the Privy Council in a case (/) where a director of a company purchased property on his own account, and subsequently sold it to the company at a higher price without disclosing the profit. Unauthorised profits of Agents. An agent is liable to refund to the principal the amount of " return commission " received by him from his sub-agent (g). Payments authorised by Custom. The law of the present section does not interfere with the customary mode of remunerating an agent, in (z) Re Haslam [1902] 1 Ch. 765. (e) In re Cape Breton Co. (1884) 29 Ch. (a) Jessel, M.E., Dunne v. English Div. 795. And see Ladywell Mining Co. (1874) L. E. 18 Eq. 524, 533536, citing v. Brookes (1887) 35 Ch. Div. 400. and approving earlier authorities ; Gluck- (/) Burland v. Earle [1902] A. C. 83. stein v. Barnes [1900] A. C. 240. () Mayen v. Alston (l&W) 16 Mad. 238, (V) Damodar Das v. Sheoram Das 265, 267. Cp. Rossiter v. Walsh (1843) (1907) 29 All. 730. 4 Dr. & W. 485, 65 E. K. 745, a peculiar (c) Wlialey Bridge Printing Co. v. case of an improvident lease by an agent to Green (1879) 5 Q. B. D. 109. a sub-agent of the same principals, where, (<) As to misrepresentation, see In re the agent not being in fact empowered Tweeds, etc., Theatre of Varieties [1902] by all the principals, Sir E. Sugden 2 Ch. 809. saw his way to set the lease aside. PAYMENTS AUTHORISED BY CUSTOM. 563 certain branches of business, by a discount or percentage which is S. 216. ultimately paid by the third party and not by his own principal. Here the agent's position is almost that of an officer of a market paid by a toll on the goods dealt with. Such allowances are constant in brokerage and insurance business, and are so well known that no special consent on the principal's part is needed to cover them. They are included in the agent's general authority to do business in the usual manner. " If a person employs another, who he knows carri'es on a large business, to do certain work for him, as his agent with other persons, and does not choose to ask him what his charge will be, and in fact knows that he is to be remunerated, not by him, but by the other persons which is very common in mercantile business and does not choose to take the trouble of inquiring what the amount is, he must allow the ordinary amount which agents are in the habit of charging " (h). These charges, being allowed on a fixed scale to all persons employed in that kind of business alike, and notorious, are not obnoxious to the rule against secret profits and corrupt allowances. Agreements against agent's duty void. An agreement between an agent and a third person which comes within the terms of the present section, or in any way puts the agent's interest in conflict with his duty, is not enforceable unless the principal chooses to ratify it. Where a mehtd (clerk), without the knowledge of his master, agreed with his master's brokers to receive a percentage, called sucri, on the brokerage earned by them in respect of transactions carried out through them by the mehtd's master, and no express consideration was alleged or proved by the mehtd, the Court refused to imply as a consideration an agreement by the mehtd to induce his master to carry on business through those brokers, and was of opinion that such an agreement would be inconsistent with the relation of master and servant. Westropp, J., said : " To support such an agreement svould be against the policy which should regulate the relation of master and servant, and would be subversive of that relation, as such an arrangement would render it the interest of the servant to connive at conduct of the parties with whom his master deals which the servant ought to be vigilant to expose and to check. . . . Could any one con- tend that the butler of a gentleman here or in London could maintain a suit against a tradesman for a percentage on his master's purchases, sup- posing an agreement to that effect ? It would be against all policy ; it would place the servant in a position inconsistent with the duty which he owes to his master " (t). (A) Great Western Insurance Co. v. (i) Vinayakrav v. Ransordas (1870) Cunliffe (1874) L. R. 9 Cb. 525, 540 ; 7 B. H. C. O. C. 90. Baring v. Stanton (1876) 3 Ch. Div. 502. 362 564 THE INDIAN CONTRACT ACT. Ss. An agreement whereby the defendant agreed to remunerate an executor 216, 217. appointed under her brother's will out of her own pocket for undertaking the duties of executor, which he declined to do without remuneration, does not create such an interest at variance with the duties imposed upon executors as to render the agreement illegal on the ground of public policy (&). The Court said () : " It has, however, been strongly contended before us that the present contract is against public policy, because it creates an interest at variance with a duty (see Egerton v. Earl Brovmlow, 4 H. L. C. 1, 250) ; that is to say, if the plaintiff be remunerated for his services there will be an inducement for him to neglect his duties and to prolong the administration instead of acting with care and diligence. We think that there is much force in this contention, but at the same time, although an agreement of this character may appear to some extent for the above reason to be opposed to public policy, we are not prepared to hold that such an agreement is necessarily unlawful. We think it should be borne in mind that if a sole executor, or where there is more than one all the executors, renounced, the estate of the testator might go unadministered unless the executor or executors undertook to accept office on receipt of remuneration from a third person, and it is quite possible that more public mischief and inconvenience might be occasioned by the estate remaining unadministered than by rewarding an executor for administering it. In the present case it seems to be quite clear upon the evidence that Shajani Kanta would not have taken upon himself the duty of executor unless he was remunerated, and we are not prepared to say that under the circum- stances the agreement entered into between him and the Maharani was unlawful." An agreement entered into by a patwari for the purchase of land within his circle for his benefit is opposed to public policy, as it creates an interest at variance with duty. It is the duty of a patwari to keep impartially the accounts of zamindars and tenants or between zamindars with conflicting interests, and no patwari can do his duty properly if he has a direct interest in property in his circle (m). 217. An agent may retain, out of any sums received Agent's right of on account of the principal in the business of s r uSs n recerved f on the a g enc J' a11 moneys due to himself in principal's account. res p ec t o f advances made or expenses properly (ft) Narayan Coomari Debi v. Shajani (in) Shiam Lai v. ChhaU Lai (1900) Kanta Chatterjee (1894) 22 Cal. 14, cited 22 All. 220 ; Slieo Narain v. Mataprasad at pp. 125, 152, ante. (1905) 27 All. 73. (0 Ib., pp. 20, 21. AGENTS RIGHT OF RETAINER. 56 incurred by him in conducting such business, and also such S. 217. remuneration as may be payable to him for acting as agent. The right conferred in terms by this section is in the nature of retainer, and assumes the agent to have money for which he is accountable to the principal in his hands or under his control. S. 221 (p. 570, below) further gives the agent a possessory lien on the principal's property in his custody. Nothing in the Act expressly gives him an equitable lien, i.e., a right to have his claims satisfied, in priority to general creditors, out of specific funds of the principal which are not under his control. Such a right, however, may exist in particular cases. In the special case of a solicitor it is well settled that a judgment which he has obtained for his client by his labour or his money should stand, so far as needful, as security for his costs, and he is entitled to have its proceeds pass through his hands. The Court will not allow any collusive arrangement between parties to deprive the solicitor of this benefit (n). But intention to defraud the successful party's solicitor is not presumed from the mere fact of the action being settled without his assistance (o). It seems doubtful, however, whether this rule can properly be regarded as having anything to do with the general law of agency, and therefore whether it can furnish any safe guidance for our present purpose. Though an agreement entered into between a pleader and his client respecting his remuneration may be void under the provisions of s. 28 of the Legal Practitioners Act, 1879, if it is not reduced to writing and filed in court, the pleader does not, by reason of that fact, lose his right under the present section to retain disbursements made by him on his client's behalf out of the sums that may be received by him on account of his client in the case (p). The language of this section is not very well fitted to cover damages and costs for which the principal may be liable to indemnify the agent under s. 222, but it is hardly possible to suppose that it would not be held to do so. Pakki Adat. A pakka adatia is entitled to the charges of remitting to the constituent the profits made by him on the constituent's behalf, as an agent is under this section (q). Business. The word "business" in this section means the same business or a continuing business. Hence money received by an agent in one business cannot be retained by him on account of remuneration alleged () Ex parte Morrison (1868) L. R. 4 (j>) Subba Pillai v. Ramasami Ayyar Q. B. 153, 156. See Oidlianjl Sangjibhoy (1903) 27 Mad. 512. v. Raglwwji Vijpal (1906) 30 Bom. 27. (q) Kedarmal Bhuramal v. Surajmal (o) The " Hope" (1883) 8 P. D. 144. Qovindram (1907) 9 Bom. L. R. 903, 911. 566 THE INDIAN CONTRACT ACT. Ss. to be due to him in a different business altogether which had long since 217, 218. been completed (r). 218. Subject to such deductions, the agent is bound Agent's duty to ^ P a J * ^ s principal all sums received on pay sums received ^jg accoun t. for principal. Mode of payment. It follows from this rule that an agent to receive money has generally no authority to receive anything else as equivalent. As between the principal and a third person, a set-off or balance of account between that person and the agent in his own right is not a good payment to the agent on behalf of the principal. The debtor ' ' must pay in such a manner as to facilitate the agent in transmitting the money to his prin- cipal " (s). It seems that an alleged custom to the contrary cannot be sustained. If money is paid to an agent on his principal's account by a person who is also indebted to the agent personally, the agent is not entitled to appropriate the money to his own debt, but must pay it over to the prin- cipal (t). Nor is an agent who has received money on the principal's account entitled to set up against the principal claims made by third persons in respect of the money (). Payments in respect of illegal transaction. If an agent receive money on his principal's behalf under an illegal or void contract, the agent must account to the principal for the money so received, and cannot set up the illegality of the contract as a justification for withholding payment, which illegality the other contracting party had waived by paying the money (x). Upon this principle it has been held that an agent receiving cesses from tenants which are illegal under the Bengal Tenancy Act (y), or moneys due to the principal under a wagering contract (z), is bound under the provisions of this section to pay the same to the principal. But this rule does not apply where the contract of agency is itself illegal (a). And it is open to an agent who has received money in respect of a void (7-) Sardar Muhammad v. Babu Das- Shola Keith v. Mul Chand (1903) 25 All. wandhi (1885) Punj. Rec. no. 49. 639. 00 Pearson v. Scott (1878) 9 Ch. D. 102, (//) Xagendrabala v. Guru Doyal (1903) 108. SOCal. 1011. (0 Heath v. Chilian (1844) 12 M. & W. (z) Shola Nath v. Mai Chand, *uj>i-u, 632, 67 R. R. 447 ; Shaiv v. Picton (1825) note (a-). 4 B. & C. 715, 28 R. R. 455. (a) Sykes v. Beadon (1879) 11 Ch. D. - (u) Roberts v. Ogilby (i821) 9 Price, 170, per Jessel, M.R., at p. 193 et seq., 269, 23 R. R. 671. where the earlier cases are considered and ( Ex parte Gomez (1875) L. R. 10 (a?) Maddenv. Kempster (1807) 1 Camp. Ch. 639. See also the cases cited above, 12. p. 507, n. (A). AGENT'S LIEN. 571 the property, did not constitute " disbursements and services in respect of" S. 221. that property, and the agents were, therefore, not entitled to the lien claimed (a). How far lien effective against third persons. The lien, whether general or particular, of an agent attaches only on property in respect of which the principal has, as against third persons, the right to create a lien (6), and, except in the case of money and negotiable securities, is confined to the rights of the principal in the property at the time when the lien attaches, and is subject to all rights and equities of third persons available against the principal at that time (c). It seems unnecessary to give illustrations of this rule or to multiply authorities, which are numerous, because an agent's lien being founded on a contract, express or implied, with the principal, it obviously follows that the law must be -as stated. In the case of moneys or negotiable securities, an agent's lien is not affected by the rights or equities of third persons (d), provided he receives them honestly, and has no notice of any defect in the title of the principal at the time when the lien attaches (e). This does not depend on any principle of agency, but on the rule that any person who takes a negotiable instrument in good, faith and for value acquires a good title notwithstanding any defect in the title of the person from whom he takes it ; a person taking such an instrument under circumstances giving him a lien thereon being considered a holder for value to the extent of the lien (/). Lien of sub-agents. A sub-agent who is employed by an agent with- out the authority, express or implied, of the principal (g) has no lien, either general or particular, as against the principal (K). But a sub-agent who is properly apnointed has the same right of lien against the principal in respect of debts and claims arising in the course of the sub-agency, on property coming into his possession in the course of the sub-agency, as he would have had against the agent employing him if the agent had been the owner of the property; and this right is not liable to be defeated by a (a) In re Bombay Sawmills Co., Ltd. 430. (1889) 13 Bom. 314, 321, 322. 0) Solomons v. Batik of England (1810) (ft) ExparteBeall (1883) 24 Ch. Div. 13 East, 135, 12 R. E. 341 ; De la 408 ; Curiliffe v. Blackburn Building Chaumette v. Bank of England (1829) !) Society (1884) 9 App. Gas. 857. B. & C. 208, 32 R. R. 643 ; Ex parte (c) London and County Bank v.Ratdiffe Kingston (1871) L. R. 6 Ch. 632. (1881) 6 App. Gas. 722; Turner v. Letts (/) London and Joint Stock Bank v (1855) 20 Beav. 185; Holli* v. Claridge Simmons [1892] A. C. 201; Misa v. (1813) 4 Taunt. 807, 39 R. R. 662, 663; Oiirrie (1876)1 App. Gas. 554. Pratt v. Vizard (1833) 5 B. & Ad. 808, () Seymour v. Pychlau (1817) 1 B. & (y) White v. Bencltendorff (1873) 29 Aid. 14. L. T. 475. (p) Tetley v. Shand (1872) 25 L. T. (r) Power v. Butcher (1829) 5 M. & R. 658, 327, 34 R. R. 432. EXCESS OF AUTHORITY BY AGENT. 579 with the agent acts in good faith (s). This does not depend on the principle Ss. of estoppel, and it is immaterial whether the third person has any know- 226, 227. ledge of the existence or extent of the agent's actual authority or not ()_ With regard to contracts and acts which are not actually authorised, the principal may be bound by them, on the principle of estoppel, if they are within the scope of the agent's ostensible authority ; but in no case is he bound by any unauthorised act or transaction with respect to persons having notice that the actual authority is being exceeded. This subject is dealt with by s. 237 and the commentary thereon (l). This section does not touch the conditions under which the agent can sue or be sued on the contract in his own name, as to which see ss. 230 234, pp. 584 598, below. The principal must be able to show that the third party dealt with the agent as such (). 227. When an agent does more than he is authorised to do, and when the part of what he does, Principal how far bound when agent which is within his authority, can be separated exceeds authority. . . i from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal. Illustration. A., being owner of a ship and cargo, authorises B. to procure an insurance for 4,000 rupees on the ship. B. procures a policy for 4,000 rupees on the ship, and another for the like sum on the cargo. A. is bound to pay the premium for the policy on the ship, but not the premium for the policy on the cargo. " The principal is not bound by the unauthorised acts of his agent, but is bound where the authority is pursued, or so far as it is distinctly pursued": S. A. 170. This and the following section must be read subject to s. 237 (below, p. 601). (s) Hanibro v. Burnand [1904] 2 K. B. there does not appear to be any distinc- 10, where authority was given to under- tion in the application of the principle write policies of insurance in the name of between a written and a verbal authority, the principal according to the ordinary (f) See also ss. 108 and 178 as to sales course of business at Lloyd's, and the and pledges by persons having possession agent, in fraud of the principal, under- of goods or documents of title thereto, wrote certain guarantee policies. In this (u) Sim's v. Bond (1833) 5 B. & Ad. case the authority was in writing, but 389, 39 E. E. 511. 372 580 THE INDIAN CONTRACT ACT. Ss. 228. Where an agent does more than he is authorised 228, 229. Principal not to do, and what he does beyond the scope of 0^:^11^ ^s authority cannot be separated from what is not separable. ^ within it, the principal is not bound to recognise the transaction. Illustration. A. authorises B. to buy 500 sheep for him. B. buys 500 sheep and 200 lambs for one sum of 6,000 rupees. A. may repudiate the whole transaction. The law declared in this and the preceding section is concisely illus- trated by an English case where B., an insurance broker at Liverpool, was authorised by A. to underwrite policies of marine insurance in his name and on his behalf, the risk not to exceed 100 by any one vessel. B. underwrote a policy for Z., without A.'s authority or knowledge, for 150. Z. did not know what the limits of B.'s authority were, but it was well known in Liverpool that a broker's authority was almost invariably limited, though the limit of the authorised amount in each case was not disclosed. The Court held that A. was not' liable for the insurance of 150 which he had not authorised, and the contract could not be divided so as to make him liable for 100 (v). The only argument to the contrary was that in the circumstances B. must be regarded as a general agent whose powers could not be limited by any private instructions. Further illustrations are supplied by Indian cases. A. authorises B. to draw bills to the extent of Rs. 200 each. B. draws bills in the name of A. for Rs. 1,000 each. A. may repudiate the whole transaction (#). A. instructs B. to enter into a contract for the delivery of cotton at the end of January. B. enters into a contract for delivery by the middle of that month. A. is not bound by the contract, and any custom of the market allowing B. to deviate from A.'s instructions will not be enforced by the Court (y). 229. Any notice given to or information obtained by the agent, provided it be given or obtained Consequences of notice given to in the course or the business transacted by him for the principal, shall, as between the O) Baines v. Ewing (1866) L. R. 1 Ex. B. H. C. 319. 320. (y) Arlapa Nayak v. Narsi Keshavji O) Premab/iai v. Brown (1873) 10 (1871) 8 B. H. C. A. C. 19. NOTICE THROUGH AGENT. 581 principal and third parties, have the same legal consequence S. 229. as if it had been given to or obtained by the principal. Illustrations. (a) A. is employed by B. to buy from 0. certain goods, of which 0. is the apparent owner, and buys them accordingly. In the course of the treaty for the sale, A. learns that the goods really belonged to D., but B. is ignorant of that fact. B. is not entitled to set off a debt owing to him from 0. against the price of the goods. (b) A. is employed by B. to buy from C. goods of which C. is the apparent owner. A. was, before he was so employed, a servant of C., and then learnt that the goods really belonged to D., but B. is ignorant of that fact. In spite of the knowledge of his agent, B. may set off against the price of the goods a debt owing to him from 0. [In illustration (b) it must be understood, as the fact was in the corresponding English case mentioned below, that C. is D.'s factor selling in his own name, and there is no question of fraud.] The rule laid down in this section is intended to declare a general principle of law. " It is not a mere question of constructive notice or inference of fact, but a rule of law which imputes the knowledge of the agent to the principal, or, in other words, the agency extends to receiving notice on behalf of his principal of whatever is material to be stated in the course of the proceedings " (,?). But by the terms of the present section, which are cited in the same judgment, the application of the principle is limited by the condition that the agent's knowledge must have been obtained " in the course of the business transacted by him for the principal" (a). This is further enforced by illustration (b), which appears to be taken from a decision of the Court of Common Pleas in 1863. Here the general rule was laid down as being " that whatever an agent does within the scope of his employment, and whatever information comes to him in the course of his employment as agent, binds his principal " (b). This limitation, however, was rejected by the Court of Exchequer Chamber, which unanimously reversed the decision of the Common Pleas, and held that the buyer was not entitled to set off (z) Judgment of Judicial Committee Ind. Ap. 179, 184. in Rampal Singh v. Bullthaddar Singh (V) Dresser v. Norwood (1863) 14 C. B. (1902) 25 All. 1, 17 ; L. B. 29 Ind. Ap. N. S. 574, 587, per Erie, C.J. Willes, J., 203. and Keating, J., delivered judgments to (a) See C/tubildan LallooWiai v. Dayal the same effect. Moioji (1907) 31 Bom. 566, 581 ; L. R. 34 582 THE INDIAN CONTRACT ACT. S. 229. a debt due to him from the factor. "We think," the Court (c) said, "that iu a commercial transaction of this description, where the agent of the buyer purchases on behalf of his principal goods of the factor of the seller, the agent having present to his inind at the time of the purchase a know- ledge that the goods he is buying are not the goods of the factor, though sold in the factor's name, the knowledge of the agent, however acquired, is the knowledge of the principal." Thus the law of British India on this point follows the reversed decision of the Court of Common Pleas. It may have been a deliberate preference, or it may be permissible to conjecture that the section was originally drafted in 1864 or 1865, before the report of the case in the Exchequer Chamber was published, and that report was afterwards overlooked. Probably the difference is seldom of practical importance, but it seems inconvenient that such a difference should exist between English and Indian law without very strong reasons. The following are illustrations from the English authorities of the rule stated in the section. An agent of an insurance company having negotiated a contract with a man who had lost the sight of an eye, it was held that the agent's knowledge of the fact must be imputed to the company, and that it could not avoid the contract on the ground of non-disclosure thereof by the assured (d). A ship sustained damage in the course of a voyage, and the master subsequently wrote a letter to the owner, but did not mention the fact of the damage. It was held that the master ought to have com- municated the fact, and, the owner having insured the ship after receipt of the letter, that the insurance was void on the ground of non-disclosure (e). When the knowledge of an agent is imputed to the principal, the principal is considered to have notice as from the time when he would have received notice if the agent had performed his duty and communicated with him with reasonable diligence (/). The knowledge of an agent is not imputed to the principal unless it is of something that it is his duty as agent to communicate to the principal. It is not the duty of a policy broker, employed to effect an insurance, to com- municate to his principal material facts coming to his knowledge in relation (c) Pollock, C.B., Orompton, J., Bram- Co. [1892] 2 Q. B. 534. well, B., Channell, B., Blackburn, J., and (e) Gladstone v. King (1813) 1 M. & S. Shee, J. : S. C. in Ex. Ch. 1864, 17 C. B. 35, 14 R. R. 392. And see Fitzherbert v. N. S. 466, 481 . This is contrary to Story's Mather (1785) 1 T. R. 12, 1 R. R. 134. opinion (S. A. 140), but is accepted by (/) Proudfoot v. Montefiorl (1867) L. R. his later editors and in American decisions 2 Q. B. 511, where it was held under the to which they refer. particular circumstances that the agent (d) Bawden v. London, e.tc., Assurance ought to have telegraphed. NOTICE THROUGH AGENT- 583 to the subject-matter of the proposed insurance, but only to make disclosure g. 229. of all such facts to the insurers ; and accordingly, where a broker failed to effect a desired insurance, and another broker was employed, who suc- ceeded, it was held that the policy could not be avoided on the ground of the non-disclosure of a material fact which had come to the knowledge of the first-mentioned broker, but of which neither the principal nor the broker who effected the policy was aware (g). Nor will notice given to or information acquired by an agent of circumstances which are not material to the business in respect of which he is employed be imputed to the principal (A). An important exception to the rule that the knowledge of an agent is equivalent to that of the principal exists in cases where the agent has taken part in the commission of a fraud on the principal. In such cases notice is not imputed to the principal of the fraud or the circumstances connected therewith, because of the extreme improbability of a person communicating his own fraud to the person defrauded (i). On this ground it has been held in India that notice will not be presumed to have been given by an attorney to his client where such notice would involve a confession by the attorney of a fraud practised by himself (&). But the exception does not apply where the fraud is committed, not against the principal, but against a third person (I). And the mere fact that an agent has an interest in concealing facts from his principal is not sufficient to prevent his knowledge of those facts from being impvited to the principal, if it is his duty to communicate them (m). Where, however, the person seeking to charge the principal with notice was aware that the agent intended to conceal his knowledge, such knowledge will not be imputed to the principal (n). It is to be observed that notice through an agent is not the same (jf) Blackburn v. Fi/70r.?(1887) 12 App. employment to receive notices in connec- Cas. 531. And see In re Fenwich [1902] tion with mercantile transactions. 1 Ch. 507 ; Societ6 Generale de Paris v. (?) Cave v. Cave (1880) 15 Ch. D. 639 ; Tramways Union Co. (1884) 14 Q. B. Div. Waldy v. Gray (1875) L. K. 20 Eq. 238 ; 424 ; In re Payne [1904] 2 Ch. 608. In re Fitzroy Steel Co. (1884) 50 L. T. (h) Wilde v. Gibson (1848) 1 H. L. Gas. 144. (505, 71 R. R. 191 ; Powles v.Paye (1846) (&) Hormasji v. Jlfankurarbai (1875) 3 C. B. 16, 71 R. R. 262, where the direc- 12 B. H. C. 262. tors of a banking company, who had no (Z) lioursot v. Savage (1866) L. R. 2 voice in the management of the accounts, Eq. 134; Dixon v. Winch [1900] 1 Ch. acquired knowledge of circumstances re- 736. lating thereto ; Tate v. Hyslop (1885) 15 (/) Holland v. Hart (1871) L. R. 6 Ch. Q. B. D. 368, where a material fact in 678 ; Bradley v. Riches (1878) 9 Ch. D. connection with an insurance had been 189 ; Dixon v. Winch, last note, disclosed to the insurer's solicitor. It is () Sharpe \. Foy (1868) 17 W. R. 65. not in the ordinary course of a solicitor's 584 THE INDIAN CONTRACT ACT. Ss. thing as constructive notice and should not be confused with it. The 229, 230. agent's knowledge is imputed to the principal without regard to any question of what the principal in person knew or might have known. Such is not the nature of constructive notice. A man is said to have constructive notice of that which he is treated as having known because, though not proved to have actually known it, he might and ought to have known it with reasonably diligent use of the means of knowledge at his disposal. Now an agent's constructive as well as his actual notice may be imputed to the principal in any transaction where constructive notice has to be considered at all (o). On the whole, then, a man may have notice cither by himself or by his agent, and that notice may be either actual or (in an appropriate case) constructive. 230. In the absence of any contract to Agent cannot . personally enforce, that effect, an agent cannot personally enforce nor be bound by, __^_ . contracts on behalf contracts entered into by him on behalf of his of principal. . . . principal, nor is he personally bound by them. Such a contract shall be presumed to exist in the following cases: Presumption of contract to (1) where the contract is made by an contrary. agent for the sale or purchase of goods for a merchant resident abroad : (2) where the agent does not disclose the name of his principal : (3) where the principal, though disclosed, cannot be sued. Principle of the Rule and Exceptions. The test question in cases within the principle of this section is always to whom credit was givenjby the other party, or, if that cannot be proved as a fact, to whom it may reasonably be presumed to have been given. Thus, in the cases here specially mentioned, the party cannot be supposed to rely exclusively on a foreign principal whom, by general mercantile usage, the agent's conti-act is not understood to bind, or on a person whose name he does not know, and whose standing and credit he therefore cannot verify, or on a person or body who, for whatever reason, is on the face of the transaction not (t) That the equitable refinements of in Manchester Trust \. Furness [1895] constructive notice do not apply to com- 2 Q. B. 539, 545. mercial transactions, see per Lindley, L.J., RIGHTS AND LIABILITIES OF AGENT ON CONTRACTS. 585 legally liable. For the general rule it is needless to multiply authorities. S. 230. " Ordinarily an agent contracting in the name of his principal and not in / his own name is not entitled to sue, nor can he be sued, on such contracts." ' "When in making a contract no credit is given to himself as agent, but credit is exclusively given to his principal, he is not personally liable thereon": S. A. 261, 263, 271, 391. The rule applies although the agent knows that the contract is one that he has no authority to make on behalf of the principal, and makes it fraudulently. Even in that case he cannot be sued on the contract if it is professedly made by him merely in his capacity as agent (p). Contract to the contrary. Whether an agent, apart from the cases specially mentioned, is to be taken to have contracted personally, or merely on behalf of the principal, depends on what appears to have been the intention of the parties, to be deduced from the nature and terms of the particular contract and the surrounding circumstances (q). In the case of oral contracts the question is purely one of fact (?*). If the contract is in writing, the presumed intention is that which appears from the terms of the written agreement as a whole (s). Where, in an agreement to grant a lease, the agent was described as making it on behalf of the principal, but in a subsequent portion of the document it was provided that he (the agent) would execute the lease, it was held that he had contracted per- sonally although the premises belonged to the principal (t). A contract in tlip following form : " We the undersigned, three of the directors, agree to repay 500^. advanced ... to the company," was held to be a personal contract on the part of the directors (u). On the other hand, a contract in the terms " I undertake on behalf of A. (the principal) to pay, &c.," signed by the agent, was held not to involve personal liability (.<;). A broker selling expressly on account of a known "principal will not be liable to him for the price, although the buyer is undisclosed and described in the sold note as "my principal " (y). (2') Lewis v. Nicholson (1852) 18 Q. B. 503, 88 K. R. 683 ; Jenltlns v. Hutchinson (1849) 13 Q. B. 744, 78 K. R. 500. But he may be sued for compensation under s. 235, or in an action of deceit. (. Irexon v. Conintfton (1823) 1 B. & C. 160, 25 R. R. 344. (y) South-well v. Sowdifcfi (IS'fi) 1 (.'. 1'. Div. 574. 586 THE INDIAN CON TRACT ACT. S. 230. | y An agent who signs a contract in his own name without qualification, //though known to be an agent, is understood to contract personally, unless , a contrary intention plainly appears from the body,. flf the instrument^ (z), and the mere description of him as an agent, whether as part of the signa- ture or in the body of the contract, is not sufficient indication of a contrary intention to discharge him from the liability incurred by reason of the unqualified signature (a). On the other hand, if words are added to the signature, indicating that he signs " as an agent," or on behalf of the principal, he is considered not to contract personally, unless it plainly appears from the body of the contract, notwithstanding the qualified signature, that he intended to make himself a party (b). The authorities in support and illustration of these rules of construction are very numerous (c), but the rules themselves are so well established and recognised that it has been deemed sufficient to mention only a few of the cases. Where an agent signed a charter-party in his own name without qualification he was held personally liable, although he was described as an agent for named principals (d). A similar decision was given in a case where the agent was described in the body of the contract as " consignee and agent on behalf of" his principal, naming him (e). On the other^and, the^jvords ".on account of " (/) or "on behalf of" (g) a named principal in the body of the contract have been held sufficient to exclude personal lial >ility, notwithstanding an unqualified signature. Lennard v. Robinson (h} is an instance of a case where an agent was held personally liable because he appeared as a contracting party in the body of the contract, although he signed it " by authority of and as agent of" a named principal. Oral evidence of intention is not admissible for the purpose of dis- charging an agent from liability on a written contract, from the terms of which he appears to have intended to contract personally (i) ; although it has been held in England that he is entitled, by way of equitable defence, (z) Higgins v. Senior (1841) 8 M. & W. 834, 58 R. R. 884 ; Fairlie v. Fenton (1870) L. R. 5 Ex. 169 ; Colder v. Dolell (1871) L. R. 6 C. P. 486 ; Dutton v. Marsh (1871) L. R. 6 Q. B. 361. (a) Hovgk v. Manzanos (1879) 4 Ex. D. 104; Hutcheson v. Eaton (1884) 13 Q. B. Div. 861. (?>) Deslandes v. Gregory (1860) 30 L. J. Q. B. 36 ; Redpath v. Wigg (I860) L. R. 1 Ex. 335. (c) See Bowstead on Agency, 3rd ed., pp. 372376. (), unless the agent is estopped by his conduct, or by the terms of the contract, from disputing the validity of the settlement or right of set-off^). (//) Krishna v. Krishnasami (1900) 23 advances). Mad. 597, 600. O) Atkyns v. Amber (1796) 2 Esp. 493 (i) Ib., pp. 604, 607. (defendant notentitled, in action by broker (k) Smith v. Lyon (1813) 3 Camp. 465, for price of goods sold in own name on 14 R. R. 810. which he had made advances, to set off debt (1) Gibson v. Winter (1833) 5 B. & Ad. due from principal) ; Robinson v. Butter 96, 39 R. R. 411 (in an action by a policy (1855) 4 E. & B. 954, 99 R. R. 849 (action broker, a payment by way of set-off was by auctioneer for price of goods sold : plea held a good defence, though it would not that defendant had paid the principal have been a good payment as against the held bad) ; Grice v. Kenrick (1870) L. R. principal). 5 Q. B. 340 (action by auctioneer for price (>) Willisv.Baddflley[1892]2Q.'B.32-l. of goods sold : settlement with the prin- (/t) Atkinson v. Coteswortk (1825) 3 B. cipal which did not operate to the preju- & C. 647, 27 R. R. 450 ; Rogers v. Hadley dice of the plaintiff held a good defence). (1861) 2 H. & C. 227. (q) Coppin v. Walker (1816) 2 Marsh. (o) Drinkwater v. Goodwin (1775) 497, 17 R. R. 505 ; Coppin v. Craig (1816) Cowp. 251 (sale by factor in his own name 2 Marsh. 501, 17 R. R. 508 (in these cases of goods on which he had a lien for an auctioneer, having sold goods which UNDISCLOSED AGENCY. 593 231. If an agent makes a contract with a person who Ss. Rights of parties neither knows, nor has reason to suspect, that ' by a a gent r not made he is an agent, his principal may require the performance of the contract ; but the other contracting party has, as against the principal, the same rights as he would have had as against the agent if the agent had been principal. If the principal discloses himself before the contract is completed, the other contracting party may refuse to fulfil the contract, if he can show that, if he had known who was the principal in the contract, or if he had known that the agent was not a principal, he would not have entered into the contract. "Discloses himself." The High Court of Bombay has expressed the opinion that the right of the third party to repudiate the contract under the second paragraph arises only where the principal himself makes the disclosure, and that it does not arise where the disclosure is made by some other person or the information reaches him from some other source (r). 232. Where one man makes a contract with another, Performance of neither knowing nor having reasonable ground suppSedTo^ 611 * to suspect that the other is an agent, the principal. principal, if he requires the performance of the contract, can only obtain such performance subject to the rights and obligations subsisting between the agent and the other party to the contract. Illustration. A., who owes 500 rupees to B., sells, 1,000 rupees worth of rice to B. A. is acting as agent for C. in the transaction, but B. has no knowledge nor reasonable ground of suspicion that such is the case. C. cannot compel B. to take the rice without allowing him to set off A.'s debt. Rights of Undisclosed Principal. Like previous learned commentators on these two sections, we are at a loss to discover any difference between were described as the property of a named not to pay the principal). principal, allowed purchasers to take the (r) Lnkshumandas v. Lnne (1904) 32 goods away without giving them notice Bom. 356. i.e. 38 594 TICK INDIAN CONTRACT ACT. S. 232. them, except that s. 231 expresses the same matter more fully. There is a clause very like s. 232 in the Indian Law Commissioners' draft, but nothing corresponding to s. 231. We are inclined to conjecture that s. 231 was an amendment intended to replace the section as first drawn, and that finally both clauses were retained either by inadvertence or by way of abundant caution. The difficulty thus raised is not serious, for there is no doubt about the substance of the law ; but it has been judicially discussed. In Premji v. Afad/towji (s), Marriott, J., said : " I do not think s. 232 is a repetition of the first paragraph of s. 231. It is, I think, a qualification of the first portion of that paragraph which gives a principal a general right to enforce a contract entered into by his agent. S. 232 qualifies that general right by making it subject to the rights and obligations subsisting between the agent and the other contracting party." It is submitted, however, that the ground is completely covered by the saving clause in the first paragraph of s. 231, and no further qualifi- cation is added by s. 232. The illustration to s. 232 would have been quite as appropriate to s. 231. In the case now cited it was contended that the object of s. 232 was to reproduce the law as supposed to be laid down in Thomson v. Davenport (t) and Armstrong v. Stokes (), namely, that the right of the other contracting party to hold the principal liable is subject to the qualification that the principal has not paid the agent, or that the state of accounts between the principal and agent has not been altered to the prejudice of the principal. But this contention did not prevail, and it was said that the only qualification imposed upon the rights of the other contracting party was that specified in s. 234. Almost at the same time, in fact, the Court of Appeal in England (x), overruling, or refusing to accept literally, the wider dicta in Thomson v. Davenport and Armstrong v. Stokes (y), approved the more guarded judgment of Parke, B., and the Court of Exchequer in Heald v. Kenworthy (z) : " If the conduct of the seller would make it unjust for him to call upon the buyer for the money, as, for example, where the principal is induced by the conduct of the seller to pay his agent the money on the faith that the agent and seller have come to a settlement on the matter, or if any representation to that effect is made by the seller either by words or conduct, the seller cannot afterwards throw off the mask and sue the principal. It would be unjust (a) for him to do so. But I think that there is no case of this kind where the plaintiff (*) (1880) 4 Bom. 447, 456. (y) See foregoing notes. The authority (0 (1829) 9 B. & C. 78, 32 R. R. 578 ; of Armstrong v. Stokes is reduced to that 2 Smith's L. C., llth ed. 379. of a decision on special circumstances. (w) (1872) L. R. 7 Q. B. 598. (z) (1855) 10 Ex. 739, 745, 746. (#) Irvine v. Watmm (1880) 5 Q. B. Div. () Referring to some of the language 414, 417. used in Thomson v. Davenport. RIGHTS OF UNDISCLOSED PRINCIPAL. 595 has been precluded from recovering, unless he has in some way contributed g^ 232. either to deceive the defendant or to induce him to alter his position." Otherwise, " if a person orders an agent to make a purchase for him, he is bound to see that the agent pays the debt ; and the giving the agent money for that purpose does not amount to payment, unless the agent pays it accordingly." On similar grounds, if the principal represents the agent as principal he is bound by that representation. So if he stands by and allows a third person innocently to treat with the agent as principal he cannot afterwards turn round and sue him in his own name (6). The result is that these two sections and s. 234, taken together, fairly represent modern English law as understood in the Court of Appeal. Equities between Agent and Third Party. An undisclosed principal coming in to sue on the contract made by the agent must take the contract, as the phrase goes, subject to all equities ; that is, the third party may use against the principal any defence that would have availed him against the agent (c). " Where a contract is made by an agent for an undisclosed principal, the principal may enforce performance of it, subject to this qualification, that the person who deals with the agent shall be put in the same position as if he had been dealing with the real principal, and consequently he is to have the same right of set-off which he would have had against the agent " (d). " The law with respect to the right of set-off by a third person dealing with a factor who sells goods in his own name and afterwards becomes bankrupt is well established by George v. Clagett (e). . . . That rule is founded on principles of common honesty. One who satisfies his contract with the person with whom he has contracted ought not to suffer by reason of its afterwards turning out that there was a concealed principal" (/). The application of the rule is limited to liquidated demands () Ferrand v. Bisclioffsheim (1858) 4 Ad. 389, 393, 39 R. R. 511, 515. C. B. N. S. 710, 716. The decision shows () HumUe v. Hunter (1848) 12 Q. B. Bnshell (1865) L. R. 1 Q. B. 97, 99. 602 THE INDIAN CONTRACT ACT. S. 237. the public as competent to do the acts and to bind him thereby" : S. A. 127. " If a person authorise another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real authority. ... It is clear that he [the agent] may bind his principal within the limits of the authority with which he has been appai'ently clothed by the principal in respect of the subject-matter; and there would be no safety in mercantile transactions if he could not. ... If the owner of a horse send it to a repository of sale, can it be implied that he sent it thither for any other purpose than that of sale ? Or if one send goods to an auction-room, can it be supposed that he sent them thither merely for safe custody 1 " (q). Similarly, where a trans- action undertaken by an agent on behalf of his principal is within his express authority, the principal is bound without regard to the agent's motives, and inquiry whether the agent was abusing his authority for his own purposes is not admissible (r). Very many illustrations of the principle are to be found in the English authorities, of which the following may be given as typical examples (s). Where a principal wrote to a third person saying he had authorised the agent to see him, and, if possible, to come to an amicable arrangement, and gave the agent instructions not to settle for less than a certain amount, it was held that he was bound by a settlement by the agent for less than that amount, the third person having no knowledge of the verbal instruc- tions (<). An agent was authorised, in cases of emergency, to borrow money on exceptional terms outside the ordinary course of business, and it was held that the principal was bound by a loan on such exceptional terms made by a third person who had no notice that the agent was exceeding his authority, although no emergency had in fact arisen (ti). Where a solicitor was authorised to sue for a debt, it was held that a tender to his managing clerk was equivalent to a tender to the client, though the clerk was forbidden to receive payment, he not having disclaimed the authority at the time of the tender (x). A broker having on several occasions been permitted by his principal to draw bills in his own name for the price of goods sold, the (q) Lord Ellenborough, C.J., Pickennij () Tricltett v. TomUnxoa, (1863) 13 v. Busk (1812) 15 East, 38, 13 R. R. 364' C. B. N. S. 663. See also National 366. Cp. s. 108, Exception 1, pp. 409, Bolivian Navigation Co. v. Wilson (1880) 410, above. 5 App. Gas. 176, 209; Wliitehead v. (?) Hambro v. Burnantl [1904J 2 K. B. Titckctt (1812) 15 East, 400, 13 R. R. 509. 10, C. A., following Sank of Bengal v. () Montaigtiac v. Shitta (1890) 15 Fagun (1849) 7 Moo. P. C. 61, 74, 83 R. R. App. Gas. 357. And see Bryant v. Quebec 15, 24. Bank [1893] A. C. 179. 00 See Bowsteacl on Agency, 3rd ed., (&) Moffat v. Parsons (1814) 1 Marsh, pp. 253258, 264268, and 278283. 55, 15 R. R. 500, ESTOPPEL BY HOLDING OUT. 603 principal was held bound by a payment to the broker 1 by means of sucli S. 237. a bill, aceepted by a purchaser who had previously paid in a similar manner for goods bought by him (y). By a charter-party it is provided that the shipmaster, who is appointed by the owners, shall act as agent of the charterers only in signing bills of lading and ordering necessaries. The owners are liable on bills of lading signed by the master, and for the price of necessaries ordered by him, if the persons shipping the goods or supplying the necessaries have no notice of the charter-party (2). Illustration (b) seems to be founded on S. A. 228 : " If an agent is entrusted with the disposal of negotiable securities or instruments, and he disposes of them by sale or pledge or otherwise, contrary to the orders of his principal, to a bond fide holder without notice, the principal cannot reclaim them " (a). It must be understood in the illustration that the instruments are not handed to B. merely for safe custody. The Privy Council case of Ram Pertab v. Marshall (b), which, how- ever, was not decided with reference to the section, affords an additional illustration. In that case the principal was held liable upon a contract entered into by his agent in excess of his authority, the evidence showing that the contracting party might honestly and reasonably have believed in the existence of the authority to the extent apparent to him. The same principle is applied in the class of cases where it is held that persons dealing with incorporated companies, though they must take notice at their peril of disabilities imposed on the corporation by its special Act of Parliament, memorandum, or other public document of constitution, are entitled to assume that the directors or managers are duly exercising their authority according to the company's internal regulations. But this subject is much too special to be pursued in a commentary like the present (c). Notice of excess of authority. No act done by an agent in excess of his actual authority is binding on the principal with respect to persons having notice that the act is unauthorised. This proposition is so obvious that it would be superfluous to cite authorities, several of which relate to dealings with money and negotiable instruments (d), in support of it. One case, however, where the notice was only constructive, may be mentioned. An agent, who was appointed by a power of attorney, borrowed money on (//) Townsendv. Inglis (1816) Holt, 278, Simmons [1892] A. C. 201; Goodwin v 17 R. It. 036. And see Hazard v. Tread- Mvbarts (1876) 1 App. Ca. 476. well (1730) 1 Str. 506. (ft) (1899) 26 Cal. 701. (,-) Manchester Trust v. Fur ness [1895] (c) See Pollock on Contract, Note D. in 2 Q. B. 539 ; The Great Eastern (1868) Appendix at pp. 693, 696. L. K. 2 Ad. 88. (d) See Bowstead on Agency, 3rd ed., () See London Joint Stock Bank v. pp. 275 277, 604 THE INDIAN CONTRACT ACT. gg. the faith of a representation by him that the power gave him full authority 237, 238. to borrow, and misapplied it. The agent produced the power, which did not authorise the loan, but the lender did not read it, and made the advance in reliance on the agent's representation. It was held that the lender must be taken to have had notice of the terms of the power, and that the principal was not bound by the loan (e). " On behalf of his principal." A principal is not bound by any act done by his agent which he has not in fact authorised, unless it is done in the course of the agent's employment on his behalf (/), and is within the scope of the agent's apparent authority (g). 238. Misrepresentations made, or frauds committed, Effect, on agree- ^J agents acting in the course of their business 3&53S for their Principals, have the same effect on by agent. agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals ; but misrepresentations made, or frauds com- mitted, by agents, in matters which do not fall within their authority, do not affect their principals. Illustrations. (a) A., being B.'s agent for the sale of goods, induces C. to buy them, by a misrepresentation, which he was not authorised by B. to make. The contract is voidable as between B. and C. at the option of 0. (b) A., the captain of B.'s ship, signs bills of lading without having received on board the goods mentioned therein. The bills of lading are void as between B. and the pretended consignor. Course of employment. The accordance of this section with the modern common law is well shown in a recent judgment delivered in the Judicial Committee by Lord Lindley : " The law upon this subject cannot be better expressed than it was by the acting Chief Justice [of New South Wales] in this case. He said : ' Although the particular act which gives the cause of action may not be authorised, still, if the act is done in the (e) Jacobs v. Morris [1902] 1 Ch. 816. it was held, in an action by the company (/) McGowan v. Dyer (1873) L. R. 8 against the surety, that the company was Q. B. 1-il, where the managing director of not responsible for the conduct of the a company obtained payment of a private managing director in the matter, debt out of certain funds, in breach of an (g) For illustrations, see Bowstead on understanding between the debtor (who Agency, 3rd ed., pp. 259 264. The rule was also indebted to the company) and a is too well recognised to need authorities in surety for his debt to the company, and support. MISREPRESENTATION BY AGENT. 605 course of employment which is authorised, then the master is liable for the S. 238. act of his servant.' This doctrine has been approved and acted upon by this Board in Mackay v. Commercial Bank of New Brunswick (K), Swire v. Francis (i) ; and the doctrine is as applicable to incorporated companies as to individuals. All doubt on this question was removed by the decision of the Court of Exchequer Chamber in Banvick v. English Joint Stock Bank (k), which is the leading case on the subject. It was distinctly approved by Lord Selborne, in the House of Lords, in Houldsivorth v. City of Glasgow Bank (I), and has been followed in numerous other cases " (m). In the passage here referred to as now the leading authority, Willes, J., delivering the judgment of the Exchequer Chamber, said : " With respect to the question whether a principal is answerable for the act of his agent in the course of his master's business, and for his master's benefit, no sensible distinction can be drawn between the case of fraud and the case of any other wrong. The general rule is, that the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit, though no express command or privity of the master be proved (n). That principle is acted upon every day in running down cases. It has been applied also [in various cases of trespass, false imprisonment by servants of corporations acting in supposed execution of their duties under by-laws, and the like]. In all these cases it may be said, as it was said here, that the master has not authorised the act. It is true, he has not authorised the particular act, but he has put the agent in his place to do that class of acts, and he must be answerable for the manner in which the agent has conducted himself in doing the business which it was the act of the master to place him in " (o). But the principal is only answerable if the fraud is committed in the course of the agent's employment on his behalf, or, in other words, if it is com- mitted for his benefit or supposed benefit (p). Where an agent, for his own purposes, and not in the interests of the principal, commits a fraud or other wilful wrong, the principal is only liable, if at all, to the extent of the benefit acquired by him (q). Misrepresentation which will make the principal liable to an action for (/O (1874) L. R. 5 P. C. 394. (o) L. R. 2 Ex. at pp. 265, 266. (/') (1877) 3 App. Ca. 106. (p~) British Mutual Bank v. Charn- (&) (1867) L. R. 2 Ex. 259. ivood Forest Rij. Co. (1887) 18 Q. B. Div. (0 (1880) 5 App. Ca. at p. 326. 714 ; Thome v. Heard [1895] A. C. 495. (wt) Citizens' Life Assurance Co. \. (q) Western Bank of Scotland v. Addie Brown [1904] A. C. 423, 427. (1867) L. R. 1 H. L. Sc. 145 ; Reid v. (n) See Laugher v. Pointer, 5 B. & C. Rigby [1894] 2 Q. B. 40 ; Bannatyne v. 547, at p. 554 [(1826) 29 R. R. at pp. 320, Mclwr [1906] 1 K. B. 103. 321]. GOG THE INDIAN CONTRACT ACT. S. 238. trespass, deceit, or other substantive wrong will, of course, be a sufficient cause for the other party to avoid an agreement induced by it. Illustration (a) seems to include both the case of the agent knowing but the principal not knowing the truth of the matter misrepresented, and the less obvious one of the agent making a statement without authority, but believing it to be true, while the principal in fact knows it not to be true. In the latter case it was formerly held that a contract thus induced was not voidable on the ground that it was obtained by the principal's fraud ; but this decision, which was not unanimous, and has been constantly discussed since, is no longer of any practical (r) authority. Illustration (b) is taken from a modern decision where the real question was as to the extent of the master's apparent authority. It would perhaps have been more appropriate to s. 237. " The authority of the master of a ship is very large, and extends to all acts that are usual and necessary for the use and enjoyment of the ship, but subject to several well-known limitations. . . . With regard to goods put on board, he may sign a bill of lading, and acknowledge the nature and quality and condition of the goods : " but it is not usual for the master to give a bill of lading for goods not put on board. On the contrary, " the general usage gives notice to all people that the authority ... is limited to such goods as have been put on board " (s). It has lately been held by the House of Lords, for similar reasons, that a company's secretary who issues a false certificate of title to shares for his own purposes does not bind the company either as in fact exercising a general authority or by way of estoppel or " holding out " (t). Fuller illustration of the kinds of acts done by agents which are deemed to be " in the course of their business for their principals " must be sought in special treatises on the Law of Principal and Agent, or in works on the Law of Torts. The difficulties, which for some time were thought serious, arose partly from reluctance to hold any one answerable for fraud or wilful wrong to which he had not actually been consenting (w), partly from a fallacious (/) Cornfoot v. Fowlte (1840) 6 M. & W. decision of the C. A. [1904] 2 K. B. 712. 358, 55 R. R. 655. " I should be sorry to See also WhitechurcTi v. Cavanagh [1902] have it supposed that Cornfoot v. Fowke A. C. 111. turned upon anything but a point of (u) See, for example, per Bramwell, B., pleading " : Willes, J., L. R. 2 Ex. at p. in Swift v. Jewsbury (1874) L. R. 9 Q. B. 262, whose opinion is now universally at p. 315. Lord Bramwell maintained to followed. the last that a corporation could not be (x) Grant v. Norway (1851) 10 C. B. sued for malicious prosecution. See now 664, 687. Citizens' Life Assurance Co. v. Brown, (f) llulen v. Gfeat Fingall Conaoli- cited note (/), p. 605, above. dated [1906] A. C. 439, affirming the ADMISSIONS BY AGENT. 607 opinion that it was impossible for a corporation to be liable for fraud or S. 238. any other wrong which, in an individual, implies a specific belief or inten- tion. It seems no harder to suppose a corporation capable of deceiving than to suppose it capable of being deceived ; and if any innocent individual must answer for the fraud of his agent, there is really less hardship in applying the same rule to a corporation. Admissions by Agent. Section 18 of the Evidence Act provides that statements made by an agent to a party to any proceedings, whom the Court regards, under the circumstances of the case, as expressly or impliedly authorised to make them, are admissions; and s. 21, that admissions are relevant and may be proved as against the person who makes them. The Contract Act is silent on the subject ; but the following brief statement of the English law, on which the provisions of the Evidence Act are evidently founded, may be usefully added here. Statements made by an agent, though not expressly authorised, are admissible against the principal if they have reference to the business on which the agent is employed on the principal's behalf at the time when they are made, and are made in the ordinary course of that employment (x). If an agent, employed to buy goods, acknowledges the receipt of them, that acknowledgment is evidence against the principal that they have been duly delivered (y~). An acknowledgment by a wife, who manages a business on behalf of her husband, and purchases the goods required, as to the state of accounts between her husband and the persons supplying the goods, is evidence against the husband, and, if it is in writing and signed by the wife, will interrupt the operation of the Statute of Limitations (2). Where a station-master, in the ordinary course of his duty, made a statement to the police as to a porter having absconded, the statement was admitted in evidence against the company in an action with reference to a parcel which had been lost in transit (a). But it is not within the scope of an agent's implied or ostensible authority to make statements concerning bygone transactions ; and, therefore, where a servant of a railway company, in answer to a question why he had not sent on certain cattle consigned to (a.-) Ellis v. Thompson (1838)3 M. &W. Columbia,, etc., Co. v. Nettleship (1868) 445, 49 K. R. 679. As to statements in L. R. 3 C. P. 499 (letters written by ship- bills of lading signed by shipmaster, see master admitted as evidence against the McLean \. Fleming (1871) 2 H. L. Sc. App. owners of the receipt of goods). 128 ; Smith v. Bedouin S. N. Co. [1896] (z) Anderson v. Sanderson (1817) 2 A. C. 70 ; Lishman v. Christie (1887) 19 Stark. 204, 19 R. R. 703. Cp. Meredith v. Q. B. 1). 333. Footner (1843) 11 M. & W. 202, 63 R. R. 581. (?/) Jliggs v. Lawrence (1789) 3 T. R. (a) Kirltstall Brewery v.Fnrness Rail- 454, 1 R.' R. 740. And see JirUish way Co. (1874) L. R. 9 Q. B. 468. 608 THE INDIAN CONTRACT ACT. S. 238. the company for carriage, said that he had forgotten them, it was held that this admission was not evidence against the company in an action for damages for the delay, because it was made a week after the alleged cause of action arose (6). Nor are unauthorised statements made by an agent concerning matters in regard to which he is not employed on the principal's behalf at the time when he makes them (e), or which are not made in the ordinary course of that employment (d), admissible in evidence against the principal, except where the principal expressly referred the person to whom the statements are made to the agent for information in the particular matter (e). A report made by an agent to his principal for his information cannot be used as evidence against the principal by third persons (/). Privilege from distress of goods in hands of agent. Where an agent carries on a trade or business in which the public are invited to entrust their goods to him for the purpose of being sold or otherwise dealt with in the course of that trade or business, goods entrusted to him for any such purpose are, while on his premises (g\ or on other premises hired by him for any such purpose (A), absolutely privileged from distress for rent. The rule does not extend to agents generally, but only to those, such as factors and auctioneers, who carry on a trade or business of a public nature (i) ; nor does the privilege attach to goods which at the time of the distress are on premises neither occupied nor hired by the agent, though they may have been sent there to be dealt with in the ordinary course of his trade or business (k). (i) Great Western Ry. Co. v. Willis ment made by the chairman of a company (1865) 18 C. B. N. S. 748. at a meeting of shareholders) ; Reyner v. (a) Parkins v. Hawkskaw (1814) 2 Pearson (1812) 4 Taunt. 662, 13 R.R.723. Stark. 239, 19 R. R. 711 ; Wilson v. (3) Williams v. Holmes (1853) 8 Ex. Turner (1808) 1 Taunt. 398, 9 R. R. 797 ; 861, 91 R. R. 802 (auctioneer) ; Gil man v. Fetch v. Lyon (1846) 9 Q. B. 147, 72 R. R. Elton (1821) 6 Moo. 243, 23 R. R. 567 205. (factor) ; Findon v. McLaren (1845) 6 (d) Barnettv. South London Tramways Q. B. 891, 66 R. R. 588 (commission Cb.(1887) 18 Q. B. D. 815 (representation agent). by secretary of tramway company that (A) Brown v. Arundell (1850) 10 C. B. certain money was due from the com- 54, 84 R. R. 457 (room hired by auctioneer, pany) ; Garth v. Howard (1832) 8 Bing. though hired only for the purpose of a 451, 34 R. R. 753 ; Meredith v. Footner particular sale). (1843) 11 M. & W. 202, 63 R. R. 581. (/) Tapling v. Weston (1883) 1 C. & B. (e) Williams v. Innes (1808) 1 Camp. 99 (agent for the sale of the goods of two 364, 10 R. R. 702. particular manufacturers only). (/) Langhorn v. Allnwtt (1812) 4 (A) Lyons v. Elliott (1876) 1 Q. B. D. Taunt. 511, 13 R. R. 663 (letters from an 210 (goods sent by A. to be sold by auction agent to his principal concerning trans- together with B.'s goods on B.'s premises actions entered into on his behalf) ; Ex not privileged). parte Abbott (1883) 22 Ch. D. 593 (state- BRIBERY OF AGENT. 609 Bribery of Agent. The rights of the principal against an agent in respect of bribes received in the course of the agency are dealt with in the commentary to s. 216. In addition to what is said there it may be mentioned that the receipt of a bribe by an agent justifies his immediate dismissal without notice, although the contract of agency may provide for its continuance for a specified time (/). As against the person promising or giving anything in the nature of a bribe to an agent, the principal may avoid any contract made or negotiated by the agent, or .in the making of which the agent was in any way con- cerned, whether he was in fact influenced by the bribery or not, it being conclusively presumed against the briber that he was so influenced (ni). Where A., having entered into a contract for the sale of a pair of horses to B., subject to a certificate of soundness from B.'s agent, secretly offered the agent a certain sum if the horses were sold, and the agent, having accepted the offer, certified that they were sound, it was held that B. was not bound by the contract, whether the agent was or was not influenced by the bribe (n). Nor is it necessary that the bribery should have any direct relation to the particular transaction. A gift made in order to influence an agent generally in favour of the giver is sufficient to render any transactions entered into by the agent voidable against the giver at the principal's option (o). The principal may, if he thinks fit, affirm any contract which is voidable on the ground of bribery. In such case, and also where avoid- ance of the contract is impossible owing to his not having discovered the bribery soon enough, the principal is entitled to recover from the briber, as money had and received, the amount given or promised as a bribe if ascertained (p) ; or to sue him and the agent, who are liable jointly and severally, for any loss sustained by reason of having entered into the contract, the damages being ascertained without reference to any sum which may have already been recovered from the agent as money received to the principal's use (q). An agent cannot maintain any action for the recovery of money promised to be given to him by way of a bribe, whether he was induced by the promise to depart from his duty to the principal or not (r). Such a (/) Boston Fishing Co. v. Ansell (1888) () Smith v. fttrby (1875) 3 Q. B. D. 39 Ch. Div. 339. ;">2, n. O) Stiipway v. Sroadwood [1899] 1 (_p) Hovenden v. Millhof (1900) 83 Q. B. 369 (ia this case the bribery was L. T. 41. discovered in the course of an action to (q) Sal ford (Mayor of} v. Lever [1891] enforce the contract) ; Odessa Tramway* \ Q. B. Ifi8 ; Gmntv. Gold, etc., Syndicate Co. v. Mendel (1877) 8 Ch. Div. 235 ; [1900] 1 Q. B. 233. Jiartram v. Lloyd (1904) 90 L. T. 357. (?) Harrington v. Victoria Dock Co. (n) SUpway v. Brondwood, above. (1878) 3 Q. B. D. 549. .o 39 610 THE INDIAN CONTRACT ACT. promise, being founded on a corrupt consideration, cannot be enforced by law. Right of principal to follow property into hands of third persons. Where the property of the principal is disposed of by an agent in a manner not expressly or ostensibly authorised (s), the principal is entitled, as against the agent and third person, subject to any enactment to the contrary (), to recover the property, wheresoever it may be found (u). Personal liability of agent to repay money received to principal's use. An agent is not, as a general rule, personally liable to repay money received by him for the use of his principal, though he may not have paid it over to the principal, and the circumstances are such that the person paying the money is entitled, as against the principal, to have it repaid (#). "Where a solicitor received a deposit at a sale by auction as agent for the seller, and the sale was not completed owing to the seller's default, it was held that no action could be maintained against the solicitor for the return of the deposit, even if he had not paid it over to the seller (y). But an agent is personally liable to repay money paid to him under a mistake of fact (2), unless he has paid it over to the principal in good faith, or dealt to his detriment with the principal in the belief that the payment was a valid one, before receiving notice of the intention of the payer to demand repayment (a). Merely crediting the principal in account is not sufficient to discharge the agent. There must be an actual change of circumstances to the agent's detriment in consequence of the payment (V). Similar principles apply where the money is paid in respect of a voidable transaction (c), or for a consideration which totally fails (d), or under (?) As to ostensible authority, see s. 237 auctioneer receiving a deposit is, however, and commentary. personally answerable, because he is in (t) See, for instance, ss. 108 and 178 as the position of a stakeholder : Gray v. to sales and pledges by persons in posses- Gutteridge (1827) 3 C. & P. 40, 31 R. R. sion of goods or of the documents of title 343 ; Edivardsv. Hodding (1814) 5 Taunt, thereto. 815, 15 R. R. 662. (u) Lang v. Smyth (1831) 7 Bing. 284, (.-) Newall v. Tomllnson (1871) L. R. 6 33 R. R. 462; Farquharson v. King C. P. 405; Butter v. Harrison (1777) [1902] A. C. 325 ; Colonial Bank v. Cowp. 565. Cody (1890) 15 App, Gas. 267; In re (a) Holland v. Russell (1863) 4 B.& S. European Bank (1870) L. R. 5 Ch. 538. 14 ; Slittnd v. Grant- (1863) 15 C. B. N. S. (ar) Gary v. Webster (1731) 1 Str. 480 ; 324. Darys v. Richardson (1888) 21 Q. B. D. (b) Butter v. Harrison, above ; Cox v. 202 ; Taylor v. Metropolitan Ry. Co. Prentice (1815) 3 M. & S. 344, 16 R. R. [1906] 2 K. B. 55. 288. (y) Ellis v. Goulton [1893] 1 Q. B. 350, (c) Holland v. Russell, above, following Bamford v. Shuttleworth (1840) ( Q. B. 276, 66 R. R. 379 ; Pa&get v. Priest see commentary to s. 230, ante, p. 584. (1787) 2 T. R. 97, 1 R. R. 440. (It) For the history of the English (If) SharlanA v. Mlldon (1846) 5 Hare, codification see the Preface to Pollock's 469, 71 R. R. 180 ; Ex parte Edwards Digest of the Law of Partnership. 392 012 THE INDIAN CONTRACT ACT. S. 239. of being technically binding on the Court (which English decisions them- selves are not in British India), they carry at least as much weight as most reported judgments. 239. "Partnership" is the relation which subsists "Partnership" Between persons who have agreed to combine their property, labour or skill in some business, and to share the profits thereof between them. Persons who have entered in to partner shin "Firm" defined. with one another are called collectively a "firm." Illustrations. (a) A. and B. buy 100 bales of cotton, which they agree to sell for their joint account. A. and B. are partners in respect of such cotton. (b) A. and B. buy 100 bales of cotton, agreeing to share it between them. A. and B. are not partners. (c) A. agrees with B., a goldsmith, to buy and furnish gold to B., to be worked up by him and sold, and that they shall share in the resulting profit or loss. A. and B. are partners. (d) A. and B. agree to work together as carpenters, but that A. shall receive all profits and shall pay wages to B. A. and B. are not partners. (e) A. and B. are joint owners of a ship. This circumstance does not make them partners. Definition and essentials of partnership. A large number of defini- tions of partnership will be found collected in the first chapter of Lord Lindley's standard treatise. The first paragraph of the present section is a simplified form of Kent's definition (I), which was adopted by Story. The definition which stands in the English Act, " The relation which subsists between persons carrying on a business in common with a view of profit," is novel ; it appears to be founded on the following dictum of the Judicial Committee in an Indian case decided on the analogy of English law : "To constitute a partnership the parties must have agreed to carry on business and to share profits in some way in common " (m). It will be observed that the definition in the Partnership Act does not mention (I) "Partnership is a contract of two Comm. iii. 23. or more competent persons to place their (///) Mollwo, March $ Co. v. Cinirt f money, effects, labour, and skill, or some Wards (1872) L. R. 4 P. 0. 419, 430. 10 or all of them, in lawful commerce or P>. L. R. 312, 320, in appeal from (1865)) business and to divide the profit and bear 3 B. L. R. A. C. 238. the loss in certain proportions " : Kent, WHAT IS PARTNERSHIP. 013 sharing as distinguished from making profits ; and it is no\v thought S. 239. arguable that in England persons may be partners in an undertaking carried on by them in concert without aiming at personal gain, or even on the express terms that none of them shall derive any individual profit from it. Indeed, it is maintained that this was always so, and that the object of dividing profits, though almost always important in fact, "appears to be rather an accident than of the essence of the partnership relation " (n). It is clear that this opinion did not occur to Kent, or Story, or the framers of the Contract Act, or Sir George Jessel, who said that partnership is at all events a contract for the purpose of carrying on a business bringing profit, and dividing the profit in some shape or other between the partners (o). However, any difficulties that may arise from the new English definition must be solved by English Courts when they occur (p). Under the present section there can be no doubt that agreement to share profits is essential to the constitution of a partnership. Kent's definition was criticised by Sir George Jessel in the judgment just now cited (o) on the ground that there may be a dormant partner, such as the widow of a former partner succeeding to his share by virtue of a provision in the articles, who contributes nothing. But, with great respect, there is no such word as " contribute " either in Kent or in the Contract Act. A dormant partner's share is no less his property because it is acquired by gift, or in pursuance of a contract to which he was not a party ; and he does combine his share with those of the other partners, whether he can be properly said to contribute it or not. Co-ownership and partnership. There is not partnership without combination to carry on a business, and therefore the mere fact that persons own in common something which produces returns, and divide those returns according to their respective interests, does not make them partners. " Persons who have no mutual rights and obligations do not constitute an association because they happen to have a common interest or several interests in something which is to be divided between them " (r). No one ever suggested that co-owners of a house let to a paying tenant, for example, are partners either as to the house or as to the rent. Their shares are distinct, independent, and separately alienable. If they used the house (/*) Lindley, p. 10. those of partners by " holding out " or by () Pooley v. Drlcf.r (187G) 5 Ch. D. actual agency, but there is no presump- 458, 472, 473. tion of authority to pledge their common (p) We should submit, if it were rele- credit, and it must be a question of fact vaut here, that a committee managing in every case to whom credit was given. the affairs of a society or the like with- O) James, L.J., in Smith v. Anderson out a view to individual gain may in par- (1880) 15 Ch. Div. at p. 275. ticular cases incur liabilities resembling 014 THE INDIAN CONTRACT ACT. S. 239. as an hotel managed by themselves or their agent for their common profit, they would be partners in the business of hotel-keeping (s). Property may even be acquired in common in order to make profit of it without creating a partnership. If A., B., and C. agree to buy land on joint account, and for interests proportioned to their contributions, and to form a company to take it over and use it for profit, this will not make them partners ; A., B., and C. have distinct shares in the property, uncontrolled except by the specific agreement, and if the company is formed and buys the land, each of them will be separately entitled to the price of his share (t). If they had started the proposed business on the land on their own account instead of selling to the company, they wonld have been partners, though the land would be partnership property only if they originally acquired it for the purpose of the joint business, or expressly agreed to bring it into the partnership stock (s. 253, sub-s. 1, pp. 638, 639, below). As to ships in particular, it has long been settled that part owners of a ship are not necessarily partners (u) ; but if they employ the ship in trade or adventure on their joint account, they ar3 partners as to that employment and the profit thereby made (#). Since the fact that several persons are co owners of a ship does not make them partners (illustration (e) ), a suit by one co-owner against another for his share of the sale proceeds of the ship and the profits earned by the ship before sale is not such a windiug-up suit as is contemplated by s. 265 (p. 657, below) (y). But " cases may sometimes occur in which a partnership exists between persons owning a ship, and the ship may be part of the assets of the firm ; but in such a case some contract of partner- ship exists between the parties, or some joint business is carried on by them to which owning of ships is merely accessory " (2). Profits. The profits contemplated by the Act, and by the common law of partnership, sometimes called " net profits," " are the excess of returns over advances, the excess of what is obtained over the cost of obtaining it." It was formerly common to speak of the total receipts or gross returns of a business as "gross profits." This is objectionable, and should be avoided (a). Obviously there may be very large gross returns and yet little or no real profit. Sharing gross returns will not create a partnership, as the English Act (s. 2, sub-s. 2), in affirmance of the general law, has expressly declared. The owner of a theatre lets a travelling manager and 00 This needs no authority, but French 713, 33 K. H. 630, G33. v. Sti/ring (1857) 2 C. B. X. S. 3o7, may (.'0 Green v. 7/m/yx (1SI7) < Ha. 31)5. be referred to ; see per Willes. J.. at p. 3GC. (?/) Jlytler AH v. L'lalier ]tu.r (lsx->) (t) London Financial Axxoritifion \. 8 Cal. 1011. Kelli (1884) 26 Ch. D. 107, 143. CO Ib., p. 1013. (it) llclme v. Smith (1831) 7 Bing. 709, (a) Liudley, 37. SHARING PROFITS AS TEST OF PARTNERSHIP. 615 his company use the building, scenery, appliances, and permanent staff, in consideration of receiving half the money taken from spectators. This does not make the owner answerable as partner or principal for anything done by the manager which may be the subject of suits or penalties, such as infringement of dramatic copyright (b). Similarly the author of a book receiving a royalty on copies sold is not a partner with the publisher ; and it seems that he is not so even if the agreement is to divide profits, the publisher taking all risk (c). Sharing profits. As common interest will not make a partnership without division of profits, so sharing of profits will not unless there is really a common business. The following sections, from 240 to 244, are only some special applications of this principle. Sharing the profits of an undertaking is not of itself a partnership, though the existence of partner- ship may often be inferred from it. " It is said (and about that there is no doubt) that the mere participation in profits inter se affords cogent evidence of partnership. But it is now settled by the cases of Cox v. Hickman (d), Rullen v. Sharp (e), and Mollwo, March & Co. v. Court of Wards (/), that although a right to participate in profits is a strong test of partner- ship, and there may be cases where upon a simple participation in profits there is a presumption, not of law, but of fact, that there is a partnership, yet whether the relation of partnership does or does not exist must depend upon the whole contract between the parties, and that circumstance is not conclusive" (). (0 Gosling v. Gaskell [1897] A. C. L. It. 312, 320, in appeal from B. L. R. 675. It would seem that after that date A. C. 238 : supp. vol. I. A. 80. the receiver was personally liable on con- (/;*) Ib. tracts made by him, as having no principal () Ex parte Tennant (1877) 6 Ch. Div. who could be sued. 303. (k) See the comments on Co.r v. lliclt- (c) Holme v. Hammond (1872) L. R. 7 man in Bullcn v. S/iarjt, note (e), last page. Ex. 218. (0 Mollwo, March Sf Co. v. Court of (p] Flemyng v. Hector (\VM] 2 M. cV: W. Wimh (1872) L. R. 4 P. C. 419, 10 B. 172, 46 It. R. 553. PARTNERSHIP AND SERVICE. 617 Partnership and service. Sometimes it is not easy to draw the line S. 239. between a partnership and a payment of salary by a share of profits. The owner of a ship, who has been paying the master fixed wages, hands over the management of the ship to the master on the terms of receiving a fixed share of profits from him. Does this leave the master the owner's servant, though a servant with large discretion, or make him a partner with the owner in the adventure 1 Probably the latter, but either opinion is plausible ( (r) 3fontf/omcry v. Thompson [1S9I] Horn. 38. A. C. 217 ; Ilcddiucuy v. Jitiitham [189(1] (//) lit., p. 40 ; Ganjxit v. A ntuijl (1898) A. C. 199. 23 Bom. 144. 620 THE INDIAN CONTRACT ACT. g s> pledge the credit or property of the family for the maintenance of the 239, 240. family business (i) ; but the other coparceners are liable to the extent of the family property only, unless the contract relied on, though purporting to have been entered into by the manager only, is in reality one to which the other coparceners are actual contracting parties (&). And though a trade, like other property, is descendible amongst Hindus, it does not follow that a Hindu infant, who by birth or inheritance becomes entitled to an interest in a joint family business, becomes at the same time a member of the trading firm, so as to require him to join as a plaintiff in suits on dealings and transactions with the adult members of the family carrying on the family business (I). In the case, however, of a partner- ship composed of certain individual members of a joint Hindu family and others who are strangers to the family, the relations of the parties are governed by the provisions of this Act, and not by any rules governing a joint Hindu family (7?*). 240. A loan to a person engaged or about to engage in Lender not a any trade or undertaking, upon a contract with adfaTJingmoney sucn person that the lender shall receive for share of profits. j ntere&t at a mte vary i ng w ith the profits, 01" that he shall receive a share of the profits, does not, of itself, constitute the lender a partner, or render him responsible as such. Sections 240 to 244 superseded a special Act XV of 1866, which reproduced, with one addition (now s. 241) (n), the provisions of the English Act 28 & 29 Viet. c. 86, often called Bovill's Act. This Act was superseded and repealed by s. 2, sub-s. 3, of the Partnership Act, 1890. It was the somewhat illogical result of the desire expressed by a con- siderable number of business men for the introduction of the system of (0 Bemola \.Mohun (1880) .1 Cal. 792 ; All. 160 ; JJlxhambhar Xatk v. Fat eft Ltil Itainlal Thahurtidat v. Lakh midland (1906) 29 All. 170. Muniram (1801) 1 B. H. C. app. li. There (V) Ltitch maneti v. Sira, Prukasa (1899) is no such implied power to pledge family 20 Cal. 349 ; Vadilal Lttllubhui v. Shah property for embarking on an entirely Khuxhul Daljiatram (1903) 27 Bom. 157. new business : Morrison v. Vcrschoyle (/) Anant Ram v. Chanim Lai (1903) (1901) 6 C. W. N. 429. 25 All. 378. See also Sudarsatiani v. (A) Ckatamayya v. Vuraduyya. (1898) JTarasintfiulit (1901) 25 Mad. 149. 22 Mad. 100 ; Krishna v. Knghnasami (//) This does not answer to anything (1900) 23 Mad. 597 ; Vellankondu v. Main- in the English Act ; the note in Whitley peddi (1908) 18 Mad. L. J. 347; i*/t- Stokes' Anglo-Indian Codes, i. 048, is antlhar Xatk v. Sftco ^'itruin (1907) 29 therefore not quite accurate. LIMITED PARTNERSHIP. 021 "commandite " partnership which has long been familiar on the Continent S. 240. of Europe. That is a system of true limited partnership in which one or more active members are liable without limit as ordinary partners, but the others are liable only to the extent of the capital they respectively con- tribute or undertake to contribute. Later it was supposed that the facility of forming limited companies had made limited partnership unneces- sary ; but the demand was renewed (Bovill's Act being satisfactory neither in substance nor in form), and a Limited Partnership Act (7 Ed. 7, c. 24) was passed in 1907. It is too early to say anything about its operation. The "private companies" recognised by the Companies Act, 1907, s. 37, are beyond our scope, and so is the question whether in England they will not be more common than limited partnerships. It is now well understood, though at the time it was not, that these enactments really added nothing in principle to the law settled by the decision of the House of Lords in Cox v. Hickman (p. 615, above). Since that decision, apart from any legislation, "it is 110 longer right to infer cither partnership or agency from the mere fact that one person shares the profits of another " (<>). That fact is relevant, but not decisive, and not to be taken by itself as if it raised a special presumption and laid the burden of proof on the party denying a partnership. All the facts must be considered together (o). The mere fact that parties call themselves partners in a writing embody- ing the agreement between them does not constitute " partnership " within the meaning of s. 239, if the true relation be that of creditor and debtor (p). On the other hand, an agreement which purports to be by way of loan and security may be in reality one of partnership, and will be given effect to as such ; " for the law, in cases of this kind, will look at the body and substance of the arrangements, and fasten responsibility on the parties according to their true and real character " (q). This principle was applied in an English case where the agreement with the so-called lender gave him many of the powers of a partner, and the loan was not repayable till the expiration of the partnership admitted to exist between the debtors. The lender was held to be liable as a partner for their debts (r). The same result followed where, in addition to similar incidents, the capital of the business consisted wholly of the sum described as a loan (s). 0) Bans<>i;/l) Podey v. Driver (1876) 5 Ch. I), v. Incell (1905) 10 C. W. N. 313. 458. (j>] See Bliaggu Lai v. De Gruytlter 0) E.r parte Delhasse (1878) 7 Ch. (1881) 4 All. 74. Div, 511. 022 THE INDIAN CONTRACT ACT. Ss. 241. In the absence of any contract to the contrary, property left by a retiring partner, or the Property left in J business by retiring representative of a deceased partner, to be used partner, or deceased .,,. ., ., >.i pintner's repre- in the business is tobe considered a loan within the meaning of the last preceding section. There is nothing verbally resembling this section in the repealed English "Act to amend the law of partnership" of 1865, nor has it been adopted in the Partnership Act, 1890; but under that Act the case is covered by the general words of s. 2, sub-s. 3, which only declare the effect of Cox v. Ilickman (p. 615, above). In a good many cases under this section the facts would also fall under s. 243. 242. No contract for the remuneration of a servant or servant or agent a g ent of an y person, engaged in any trade or S^ofpSfe 7 not undertaking, by a share of the profits of such a partner. trade or undertaking shall, of itself, render such servant or agent responsible as a partner therein, nor give him the rights of a partner. An agreement to give the gomasta of a firm a specified share of profits in lien of salary does not constitute him a partner ; and such was the practice and understanding before the Act (). The principle has been explained, and English authorities referred to, under s. 239. 243. No person, being a widow or child of a deceased partner of a trader, and receiving, by way of Widow or child of deceased partner annuitv, a proportion of the profits made by receiving annuity u i i n i out of profits not a such trader in his business, shall, by reason only of such receipt, be deemed to be a partner of such trader, or be subject to any liabilities incurred by him. 244. No person receiving, by way of annuity or other- Person receiving w i ge > a portion of the profits of any business, fofsaTeofgoSwm in consideration of the sale by him of the not a partner. goodwill of such business, shall, by reason () Ramdoyal v. Junmenjot/ (1887) 14 Cal. 791 (no dispute on this point). PARTNERSHIP BY HOLDING OUT. 023 only of such receipt, be deemed to be a partner of the person Ss. carrying on such business, or be subject to his liabilities. ' There do not seem to be any reported Indian decisions on this or the preceding section. We have nothing to add to the general explanation in the commentary on s. 239. Responsibility of 245. A person who has, by words spoken aiTo S trer e to d befieve or wr ^ten or by his conduct, led another to him a partner. believe that he is a partner in a particular firm, is responsible to him as partner in such firm. " Holding out." This is the rule of liability by "holding out," more fully stated ins. 14 of the English Act. The present section omits to say that the other party must in fact have given credit to the firm in the belief, induced by the express or tacit representation of the supposed partner, that he is a member of the firm. But the omission, if inelegant, is harmless, for without such facts there is no ground for holding any one responsible. Any representation, of this kind " can only conclude the defendants with respect to those who have altered their condition on the faith of its being true " (w). In fact, this kind of liability is neither more nor less than a special application of the principle of estoppel (x). The language of the following section is more explicit. As long ago as 1829 the rule was laid down incidentally by a great master of our law. Parke, J., said that if in the case then before the Court " it could have been proved that the defendant had held himself out to be a partner, not ' to the world ' for that is a loose expression but to the plain- tiff himself, or under such circumstances of publicity as to satisfy a jury that the plaintiff knew of it and believed him to be a partner, he would be liable to the plaintiff in all transactions in which he engaged and gave credit to the defendant upon the faith of his being such partner. The defendant would be bound by an indirect representation to the plaintiff, arising from his conduct, as much as if he had stated to him directly and in express terms that he was a partner, and the plaintiff had acted upon that statement " (y). (u) Qnarmanv.SurneU(l8iO)GM.&cW. between himself and such person or his at p. 509, 55 R. R. at p. 725, per Parke, B. representative, to deny the truth of that (V) Evidence Act I of 1872, s. 115: thing." And see Sarat Chandra Dei/ v. " When one person has by his declaration, Gopal Chandra Lalui (1892) 20 Cal. 296 act, or omission, intentionally caused or L. R. 19 Ind. Ap. 203, which is the leading permitted another person to believe a case on the subject. thing to be true and to act upon such (y} Dickinson v. Valpy, 10 B. & C. 128J belief, neither he nor his representative 140, 84 R. R. 348, 355, shall be allowed, in any suit or proceeding 024 THE INDIAN CONTRACT ACT. S. 245. Nearly half a century later the doctrine was more concisely stated in the course of the judgment delivered in a leading case before the Judicial Committee which we have already cited on s. 239 : " Where a man holds himself out as a partner, or allows others to do it, ... he is then properly estopped from denying the character he has assumed, and upon the faith of which creditors may be presumed to have acted. A man so acting may be rightly held liable as a partner by estoppel " (z). " No evidence of intention or knowledge of the consequences of his acts and conduct is necessary to make the apparent parties liable " (a). Proof of " holding out." Observe that under this section, with which the extract just given appears to agree, the creditor need not prove specifi- cally that he gave credit to the firm on the faith of a certain person being a partner in it. Giving credit to a firm is the same thing as giving credit to all and each of the persons believed by the creditor to be its members. In England neither judicial authority nor legislation (6) seems to go quite so far. It is a question of fact in each case whether credit was given on the faith of the representation. But, when the representation and the creditor's knowledge of it are proved, the remaining inference is so easily drawn that the results will almost always be the same. As the liability depends on estoppel and not on any contract between the apparent partners, it is immaterial what the agreement between them, if any, may really be. An estoppel of this kind (or of any kind) cannot result from the mere unauthorised act of a third person, such as the exhibition by a secretary of a list of intending shareholders. " The holding one's self out to the world as a partner, as contradistinguished from the actual relation of partnership, imports at least the voluntary act of the party so holding himself out. It implies the lending of his name to the partnership, and is altogether incompatible with the want of knowledge that his name has been so nsed"(r). On the other hand, there need not be any direct communication between the creditor and the apparent partne%-,and the latter need not be mentioned by name if he is sufficiently identified by description as one of the parties interested, or the like (d). It will not be overlooked that facts capable of being used to establish a case of liability Tinder this or the next following section will often be relevant to show that a partnership really did exist ; and, as the Evidence (z) Molliro, March % Co. v. Court of (c) Fox v. Clifton (1830) 6 Bing. 77(5, Ward*, L. R. 4 P. C. at p. 43."). 794. 31 R. R. 536, 545. (a) Porter v. Incell (1905) 10 C. \V. N. (d) Martyn v. Gray (1863) 14 C. B. 313, 320. N. S. 824. (V) Partnership Act, s. 14. CREDITORS AND RETIRING PARTNERS. 625 Act declares (e), when persons are shown to have acted as partners, the Ss. burden of proof is on those who say they were not partners. This is not 245, 246. estoppel, but a matter of common-sense inference. The estates of insolvent persons who were ostensible partners may have to be administered in bankruptcy as if they had been real partners (/). 246. Any one consenting to allow him- Liability of J person permitting self to be represented as a partner is liable, as himself to be . 1-1 represented as a such, to third persons who, on the faith thereof, give credit to the partnership. Holding out by acquiescence. This would seem on principle to be a particular case of leading another person to believe that one is a partner ; but the liability is declared in different terms from those used in the fore- going section, and apparently with the intention of making a presumption in favour of the creditor in one case and not in the other (see on s. 245, above). There is nothing to show how much more than passive assent is signified by the "consenting " of this section ; and the same remark applies to the corresponding words "knowingly suffers " of the English Act, s. 14. It can hardly be the law that, if A. hears a report that Z. is representing him as a partner in X. & Co., he becomes bound at his peril to notify to the world that he is not. But there is an amount of silence, in the face of known persistent representations made to persons likely to be misled, which may be good evidence of consent. All that can be said in general terms is that prudent men will rather use a little abundant caution in due season than run the risk of much more trouble at a later time. In practice questions of this kind are suggested mainly by the case of a deceased or retired member's name being continued in the firm. Since our law does not in any way require the style of a firm to correspond with the names of actual partners (p. 618, above), the presence of a given name is of itself no representation that any person bearing that name is in fact a partner. It is accordingly well settled^Siat the continuance of a deceased partner's name will not make his estate liable for partnership debts con- tracted after his death (y). But a living retired partner*may be exposed to risk in this way, that customers of the firm who have no notice of his retirement by a change of style or otherwise may go on dealing with the firm on the faith of his being a member (see s. 264, p. 656, below, and s. 36 of the English Act). Therefore it is prudent and usual to notify customers (e) I of 1872, s. 109. O/) See Partnership Act, 1890, ss. H (2), (/) Ex parte Hayman (1878) 8 Ch. 36 (3). Div. 11. i.e. 40 020 THE INDIAN CONTRACT ACT. S. 246. of changes in the constitution of the firm. No creditor, however, can hold a retired partner liable whom he did not know to be a partner before the change in the firm, and who had ceased to be a partner in fact when the credit was given. Thus a " dormant partner, 1 ' i.e., one not generally known to be such, " may retire from a firm without giving notice to the world " (A). Strictly speaking, it seems that in the case of a retiring partner the representation that he is still a member of the firm is not made by others and consented toby him, but is his own ; for, much oftcner than not, credit given on the faith of his being a partner is so given not because the other partners say anything, but because he has said nothing. Indeed, the presence of a particular name in. the firm has very little to do with the matter, save so far as the disappearance of a personal name may be a warning that some member of that name has died or retired. A retired member of a firm with an impersonal name might be liable to a customer who had known him to be a member (i). The Contract Act and the English Act are equally open to whatever criticism may be justly founded on the fore- going remarks ; but it seems a matter of form rather than of substance. Not applicable to torts. The doctrine of " holding out " does not apply to liability for civil wrongs, as it rests entirely on credit having been given to the person whom it is sought to make liable. One man is not answerable for another's wrongful acts merely because that other might be supposed to be his servant. Ostensible employment, if one may use the term, is material only so far as it tends to prove real employment (&). Estoppel distinct in kind from actual authority. It is of some importance to observe that the liability of a former partner to creditors who have not notice of his retirement rests wholly upon the apparent con- tinuing authority of the other partners to bind him by their acts. The principle is " that where a person has given authority to another (it is not peculiar to partnership), the authority being such as would apparently con tinue,he is bound to those who act upon the faith of that authority, though he has revoked it, unless he has given the proper notice of the revoca- tion"^). Hence the liability, being by estoppel, is quite different from that of the actual partners, and the ex-partner is not a joint debtor with them. The creditor may be entitled to sue at his choice the members of the old or the members of the new firm. He cannot sue them all together (m). (1i) Heath v. Saniom. (1832) 4 B. & Ad. such a case ; and in this case it failed. 172, 177, 38 R. R. 237, 242. (/.) tiaiitti v. B.nlcy [1801] 2 Q. B. 403. (0 See Carter v. Wliallcy (1830) 1 B. (1) Lord Blackburn, Scarf v. Jurd'ntr \- Ad. 11, 35 R. R. 199, where the firm was 0882) 7 App. Ca. 34.">, 3.10. " the Plas Madoc Colliery Co." Proof of (/) 2ft. 'holding out" is, no doubt, less easy in MINOR PARTNERS. 627 247. A person who is under the age of majority S. 247. Minor partner according to the law to which he is subject may ill? buttLhare ke admitted to the benefits of partnership, but cannot be made personally liable for any obli- gation of the firm ; but the share of such minor in the property of the firm is liable for the obligations of the firm. Difference from English law as to minor partners. This section looks very much as if the draftsman, either forgetting s. 11, or taking that view of ic which is now overruled by the Judicial Committee, but which was certainly plausible, had aimed at expressing the substance of English law. By the common law an infant may be a partner, though he cannot be sued for partnership debts while an infant, and the obligations contracted by him in the partnership, like any other contracts of an infant, are void- able at his election on attaining full age (n), and he cannot claim to share profits without submitting to a profit and loss account like any other partner, still less claim a return of, or in respect of, his share before there is a divisible surplus (which seems to be what the last clause of the present section indicates). But we know from s. 11, as now understood, that in British India a minor cannot make any contract at all, .and therefore cannot really be a partner. He " may be admitted to the benefits of partnership," but can he sue the other partners for an account or otherwise, and, if so, on what ground ? Not on a contract, at all events. Creditors, on the other hand, are more favoured by the next following section than under English law 7 . It is perhaps not a very apt use of language to speak of a partner's share as being liable when it is meant that his claims on the partnership funds are subject to prior claims, and that in certain events there may be no share at all. A partner's share, like that of a shareholder in a company, who is in fact a special kind of partner, is not a piece of tangible property or a specific fund. It is a mere personal right to claim a certain proportion of the divisible income, and ultimately to reclaim a certain proportion of capital, at the proper times, if and whenever it is found that there is any profit to divide and any surplus assets to distribute. This, however, is one of the matters in which inaccurate usage has been very common, and perhaps it is pastcriticism. The legal title or interest in partnership property will, as arule, be found to be in the partners jointly ; but that is quite another matter. Hindu minor's ancestral trade. There is no difference on principle between the nature of the liability of an infant admitted by agreement into a partnership business and that of one on whose behalf an ancestral trade () (,'oodc v. Ifun-iguH (1821) 3 B. & Ad. 147, 157, 24 11. 1{. 307, 314. 402 628 THE INDIAN CONTRACT ACT. o is carried cm by his guardian. A minor Hindu, therefore, on whose behalf 247 249. such a trade is carried on, is not personally liable for the debts incurred in such trade, but his share therein is alone liable (o). 248. A person who has been admitted to the benefits of partnership under the age of majority Liability of minor partner ou attaining becomes, on attaining that age, liable for all obligations incurred by the partnership since he was so admitted, unless he gives public notice, within a reasonable time, of his repudiation of the partnership. In England an infant partner who continues to act as a member of the firm after his full age, or, having acted as such during his minority, does not disclaim, is answerable for debts of the firm contracted since his majority, because he is at least an ostensible partner. But he is not conclusively held to ratify obligations contracted during his minority (p}. The present section, by including such obligations, has distinctly enlarged the creditor's rights. AVe have not to consider here the position of an infant shareholder in an incorporated company; but the case is expressly covered by the Transfer of Property Act, 1882, s. 127, whereby an "onerous gift to " a " disqualified person " must be retained after full age, etc., with the burden, if at all. 249. Every partner is liable for all debts and obli- gations incurred while he is a partner in the Partners liability for debts of usual course oi business by or on benali ot the partnership. . . partnership ; but a person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of such firm for anything done before he became a partner. Nature of partnership liabilities. The first branch of this section represents what was supposed to be the rule of equity in England before the House of Lords decided, in 1879. that a partner during his lifetime is not severally liable for debts of the firm, but oidy jointly with the other partners (q), though a deceased partner's estate can be made severally liable ; and liability for wrong or fraud committed in the course of partnership business is also joint and several (P. A. s. 12). These (() Joyfiitto \. AittyaiiMiid (1878) :? O) Gwdc v.///-miw(1821)3B.& Ad. (':!. 738; Hawjiartul v. Fwlilxt'i (189(1) 147, 157, 24 E. R. 307, 314. 20 Bom. 767, 777, 778. These decisions (04 ; P. A. s. !>. finally settled. PARTNERSHIP DEBTS. 020 peculiarities of English law do not concern us here. The second branch g. 249. is in itself elementary ; but arrangements for transferring debts from the members of an old firm to a new firm are not uncommon, and, if assented to by the old creditors, may constitute a complete novation. AVhere the business is carried on continuously, the creditors knowing of the change, both the assumption of the existing debts by the new partners and the assent of the creditors to accept them as debtors and discharge the retiring partners will.be rather easily inferred (r). Mere continuance, in an exist- ing transaction or account, of the usual course of business with the firm with notice of the death or retirement of a partner will not amount to a novation (*). There must be a distinct new transaction amounting to a new contract with the surviving or remaining members of the firm (t). Section 17 of the English Act deals more explicitly with this matter ; and see more as to assuming liability by novation in the commentary on s. 62, p. 261, above, where several of the cases cited relate to a change in the members of a partnership, though there is nothing peculiar to the contract of partnership in the principle applied. The obligations for which a partner is liable iinder the first branch of the present section include whatever is incidental to an entire contract which he aiithorised, expressly or in the usual course of business, while ho was still in the firm. A retainer given on behalf of a firm to a solicitor forms one continuing contract for the conduct of the action ; and a partner, known or unknown to the solicitor, who leaves the firm while the action is pending, is liable for the costs incm-red under the retainer after as well as ' before his retirement (11). This is the case of actual, not ostensible, con- tinuing authority, and has nothing to do Avith estoppel, and therefore the ci*editor's knowledge or belief as to the members of the firm is immaterial. Though a contract may be entered into by one partner in his own name only, his co partners will be liable to be sued on the contract, though not known to the other party at the date of the contract to be a partner, if the contract was in fact signed by the partner as agent of the firm (x), and oral evidence is admissible to show that the contract was so signed (y). The reason of the leading case is general and applies to all undisclosed principals. (/) Itolfe. v. Flower (1866) L.R. 1 P. 0. 396, C. A. 27, 40, 44. (./) JiccMam v. Drake (1841) 9 M. & \\. (.v) Re JTcad [1893] 3 Ch. 426 (fresh 79, 60 R. R. 678. deposit note taken for balance after (y) Venltatasubbiah Clietty v. Gor'ni- drawing on deposit account). dardjiihi JYaidit (1908) 31 Mad. 4">. This (t) Re Head (No. 2) [1894] 2 Ch. 236 view is quite consistent with the provisions (transfer from current to deposit account). of ss. 91 and 92 of the Indian Evidence Act, () Court v. Berlin [1897] 2 Q. B. for what those sections exclude is the oral 030 THE INDIAN CONTRACT ACT. S. 250. 250. Every partner is liable to make compensation to I'su-tiier's liability third persons in respect of loss or damage SSStffSSS* < irisi S from the neglect or fraud of any co-partner. partner in the management of the business of the firm. Ground of liability; usage of firm, how material. The principle of tins section is a branch of the universal rule that every one must answer for the acts and defaults of his servants or agents in the course of their employment. For the general illustration of this rule the text-books on the Law of Torts may be consulted. As regards the application of it now before us, the chief difficulty that occurs in practice is that of knowing whether the neglect or fraud of a partner really took place " in the manage- ment of the business of the firm," or was only his own particular wrong, for which his position in the firm gave him an opportunity (yy). Where the default consists, as it usually does, in the misappropriation of money which a customer or client was minded to entrust to the firm, it is material to" consider whether it ever came into the firm's custody ; for in this case the firm is liable for misappropriation by a partner, whether he was the partner originally trusted or not, and whether lie acted in the exercise of apparently regular authority or not (P. A. s. 11). Further, the question whether a partner was acting on behalf or with the ostensible authority of the firm can seldom be answered except by reference to the expectations created cither by the special usage of that firm, or by what is usual in that kind of business generally. Depositing securities with a banker for safe custody will make his firm responsible for a misappropriation of them ; but putting money in the hands of one member of a banking firm to be invested at his discretion will not ; for the former transaction is within the scope of what bankers in England habitually do for their customers, the latter is outside it (z). Similar distinctions hold where solicitors are employed in money matters. Receipt of money with instructions to invest it in a specific manner binds the firm, as being in the ordinary way of solicitors' busi- ness (a), but if the instructions are general to invest at the solicitor's discretion, it does not (b). But a particular firm may widen its responsibility by habitually undertaking particular kinds of business for its clients (c). evidence to alter or add to the " terms of Mer. 572, 579, with Hit/top v. CmiHtrxx of a contract," and the question as to who Jersey (1854) 2 Drew. 143,, the contracting par lies are is not a " term" (//) Jiltiir v. Bromley (1847) 2 Ph. of a contract. 354. (ijy) See Munshi Basiniddin Mvllick (V) Ilttrman v. Johnson (1853) 2 E. & B. v. Surja Kumar Nailt (1908) 12 C. W. N. 61. 716, at p. 719. (c) Rhodes v. Movies [1895] 1 Ch. 236, (z) Contrast Clayton's Case (1816) 1 C. A. PARTNER'S LIABILITY TO THIRD PERSONS. 631 A firm may also be liable for money which has come into its funds by S. 250. the irregular or fraudulent act of either a partner (cl) or an agent who is not a partner (e), and this whether the act was in the ordinary course of business or not, at all events if the partners knew or might have known of the payment and its source. But this does not really depend on anything specially belonging to the law of partnership. This section does not in terms cover the case of a partner committing, in the supposed interest of the firm, a wilful wrong, other than fraud, against a third person ; but it cannot be doubted that in such a case the firm may be liable under the wider principle mentioned above. In a recent English case one of two partners bribed the clerk of the plaintiff, who was a competitor of the firm, to disclose certain information as to the plaintiff's operations which as between him and his employer was confidential ; it was in the course of the firm's business to obtain such information by proper means. Both partners were held liable to the plaintiff(/). It has been said in the Bombay High Court that a malicious prosecution by the managing partner of a firm does not render the other members of a firm liable in damages, unless it is shown that the firm was in some way or other concerned in the prosecution and had instigated it (g). The result in this particular case may well be right, on the ground of want of authority, either general or special, and the language of the Court may have been appropriate in the circumstances, but it is submitted that this cannot be relied on as a general test. If a prosecution was undertaken on behalf of a firm by a member of it (or any other agent) having general authority to prosecute on behalf of the firm in a proper case ; if the prosecutor was acting with a view, however perverse or erroneous, to the interest of the firm, and not merely for his private purposes ; and if the prosecution was in fact malicious in the sense of being undertaken without reasonable cause, and in order to damage a person obnoxious to the firm rather than to advance justice, then, it is conceived, the partners in the firm would be liable, according to principle and the English authorities, whether at the time they knew anything of the prosecution or not (h). Wrongful employment of trust property by a trustee in a business in which he is a partner is specially dealt with by the Trusts Act, 1882, s. 67, with which compare P. A. s. 13. (d) Marsh v. Keating (1834) 1 Bing. (e) Held v. Jtigby $ Co. [1894] 2 Q. B. N. C. 198, 2 Cl. & F. 250, 289, 37 E. R. 40. 75, 10G ; Hurruolt Chand v. Gobi/id Lai (/) HairJyn v. Houston % Co. [1903] 1 Khetry (1906) 10 C. W. N. 1053 (where K. B. 81, C. A. one of two partners who dealt in piece (.; Ilnwtayne v. Hmrnc (1841) 7 034 THE INDIAN CONTRACT ACT. S. 251. account of the partnership ; he may draw, make, sign, endorse, accept, transfer, negotiate, and procure to be discounted, promissory notes, bills of exchange, cheques, and other negotiable papers in the name and on account of the partnership.' S. 125. 'The restrictions of this implied authority of partners to bind the partnership are apparent from what has been already stated. Each partner is an agent only in and for the business of the firm ; and, therefore, his acts beyond that business will not bind the firm. Neither will his acts done in violation of his duty to the firm bind it when the other party to the transaction is cognisant of, or co-operates in, such breach of duty.' " Their Lordships went on to say : " That, in ordinary trading partnerships, the power of borrowing money for partnership purposes exists, and that bills or notes given by one of the partners in the partnership firm for money so borrowed will bind the firm, is too clear to require any authority " (). In a later case the Lord Justice James said : " Ordinary partnerships are by the law assumed and presumed to be based on the mutual trust and confidence of each partner in the skill, know- ledge, and integrity of every other partner. As between the partners and the outside world (whatever may be their private arrangements between themselves), each partner is the unlimited agent of every other in every matter which is partnership business, or which he represents as partnership business, and not being in its nature beyond the scope of the partnership " (o). There is no converse presumption that the firm is the agent of the partners, and, therefore, although payment to one partner is generally a good payment to the firm, payment to the firm of a private debt due to one partner is not a discharge unless it is shown that the firm had in fact authority to receive it ( p). Subject to the rules or presumptions established for transactions of common occurrence, of which examples are given in the illustrations to this section, there is no better guidance than Lord Liudley's statement : " The question whether a given act can or cannot be said to be done in carrying on a business in the way in which it is usually carried on must evidently be determined by the nature of the business and by the practice of persons engaged in it. Evidence on both of these points is therefore necessarily admissible " (q). () Hank of Australasia v. lireillat (of a type now obsolete and probably (1847)6 Moo. F. C. at pp. 193, 194, 79 extinct) to which the principles of ordinary R. R. 53. partnership were held not to be applicable. 00 Haird's Case (1870) L. R. 5 Ch.725, Q;) Powell v. Srodhurst [1901] 2 Ch. 733. The decision was in the winding up 160. of an unincorporated joint stock company (q) Partnership, p. 135, AGENCY OF PARTNERS FOR FIRM. Admissions by partners. " An admission or representation made l>y S. 251. any partner concerning the partnership affairs, and in the ordinary course of its business, is evidence against the firm": P. A. s. 15. This is not specified iu the Indian Act, but it is an obvious and recognised consequence of a partner's general authority in the affairs of the firm. As to admissions in general and their effect, see the Evidence Act, I of 1872, ss. 17 23. Authority is not needed to show that a partner's admission is at most evidence against the firm ; it is no more against himself (r). Of course a partner cannot increase his authority to bind the firm by any statement of his own about it(). Notice to partner. Notice to any habitually acting partner of any- thing relating to partnership affairs is generally notice to the firm: P. A. s. 1(5 ; Lindley, 151 ; except where that partner is himself committing or taking part in a fraud upon the firm. It has never been decided whether " notice to a man who afterwards becomes a partner is notice to the firm." Sir G. Jessel thought " it might be so held " (t). Authority in particular transactions. The following points as to the authority of partners to bind the firm have been decided in the Indian High Courts : -- AcJcnoivledgment of D fit ly a Partner. The mere writing or signing of an acknowledgment by one partner does not necessarily of itself bind his co-partner, unless it can be shown that he had authority, express or implied, to do so. In a going mercantile concern such authority is to be presumed as an ordinary rule. No such presumption, however, arises when the partnership has been dissolved, and express authority, therefore, must be proved (), except, it must be remembered, when a partner is exercising the power given by s. 263 (cp. P. A. s. 38). Arbitration. -One partner has no power, in the absence of special authority, to bind the firm by a submission to arbitration (#). Bills of Exchange. Every partner in a mercantile or ordinary trading partnership is liable upon bills, drawn by a partner in the recognised trading business of the firm, for a transaction incident to the business of the firm, although such partner's name does not appear upon the face of the instrument (y). (>) See, if desired, Stead v. Salf, 3 Bing. All. 418. See also Manjunatlia v. Dcrnmmn at p. 103, 28 K. R. at p. 601. (1902) 2G Mad. 186. (.v) EJC partc Agaee (1792) 2 Cox, 312, (x) Ram Bkarosc v. Kallu Mai (1899) 2 R. R. 49. 22 All. 135, following English authorities ; (t} Williamson v. Harbour (1877) 9. Datooltlioy Haxxum v. Vallu 3fak09ted Ch. Div. at p. 535. (1899) 1 Bom. L. It. 828. (N) Prewji v. Dossa (1886) 10 Bom. (//) Bunarsee Dans v. Glwlam Hoosein 358 ; Gadu Bill v. Parsotam (1888) 10 (1870) 13 M. I. A. 358. 030 THE INDIAN CONTRACT ACT. S. 251. Lease or Mortgage. It has been held by the High Court of Bombay that where one partner takes a lease of premises in his own name, though on behalf of the partnership, and with the assent of the other partners, the latter are not liable to be sued by the lessor for the rent reserved by the lease (z). The decision proceeds on the ground that a lease is not a mere contract, bnt a conveyance by way of demise, and the person covenanting to pay the rent is the person to whom the demise is made only. The better opinion, however, would seem to lie that the other pai'tners arc liable for the rent, though their names do not appear on the lease, provided the lease was taken for the partnership, and this accords with the view of the Madras High Court in a later case (). And it has been held by the Privy Council that a mortgage of a village which was partnership property made by some of the partners for the benefit of the firm is binding on a member of the firm though not executed by him (/>). And likewise the manager of a joint Hindu family can bind the other co-partners by a mortgage of family property executed in his own name for the purpose of carrying on the family business (c). In a recent Madras case (cc) Wallis, J., after referring to that case said, " If, as held, I think rightly, in that case, a partner in India can mortgage partnership property by deposit of title deeds, there is, I think, no good reason why he should not effect a legal mortgage as well. The observation of Straight, J., in Harrison v. Delhi and London Bank (ccc), that in India the presumption is against the existence of such a power, was made in the case of a partnership between Englishmen, and I am unable to agree with it, especially as applied to natives of India." Exception : restriction of authority. P. A. s. 8 is all but literally identical with this. It is obviously not just that a third person should be able to hold the firm liable for an act of one partner which he knew to be unauthorised ; and such knowledge is necessarily conveyed by notice that the partner's authority is expressly restricted, in that particular, by the partnership agreement. It has been suggested by high authority (d) that there may be restrictive agreements among partners which are only, so to speak, internal agreements for penalty or indemnity to be paid by a partner (r) Ragoonathdas v. Morarjl (1892) We purposely abstain from referring to 1(> Bom. 568, citing Walters v. Northern English decisions involving the techni- C'oal Mining Co., ~> De G. M. Ac G. G29. calities of English real property law. () Chinnaramanuja \. Padmanttbha (cc) Amn Kanl v. Somasvndaram (1896) 19 Mad. 471, 476. (1908) 31 Mad. 206. (S) Jugrjecwundax v. Ramdas (1841) 2 (ccc) Harrison v. Dellti and London M. I. A. 487. J!n>ik, 4 All. 437, 459. (r) Bemola v. J/(/t?/(1880) 5 Cal. 792. (d) Lindley, 186. RESTRICTIONS OF PARTNER'S AUTHORITY. 637 if he does certain things, but do not deprive him of his authority to bind S. 251. the firm towards third persons if nevertheless he does them. It would seem, with great respect, that if such an argument is ever urged in practice the Court must consider, with regard to the terms or circumstances in the particular case, whether there is or is not an agreement restraining the power of the partner in question to bind the firm. It is a question of construction for which no rule can be laid down beforehand, and which perhaps is not very likely to arise. AVhere a partner has neither real nor apparent authority, that is, has | not authority in fact, and is not known or believed to be a partner by the person with whom he deals, his act will not bind the firm (P. A. s. 5) (e). \ This case is not expressly within the words of the present exception, but the principle is clear, and we see no reason why it should not be applied by Indian Courts on occasion. Another case more expressly provided for in the English Act is that of a partner purporting to bind the firm in a matter, on the face of it, outside the firm's usual business. P. A. s. 7 enacts that " where one partner pledges the credit of the firm for a purpose apparently not connected with the firm's ordinary course of business, the firm is not bound, \mless he is in fact specially authorised by the other partners ; but this section does not affect any personal liability incurred by an individual partner." This is really contained in the authorities referred to above (p. 525). The prin- ciple is applicable in the case (among others) of a partner raising money on the credit of the firm in such circumstances that the lender knows the loan to be intended for the borrower's private use and not for partnership purposes. In such a case the separate creditor must know that the partner is acting outside his normal authority, and therefore he cannot hold the firm liable unless there is in fact express authority from the other partners (/). Will reasonable belief in the existence of express authority be enough to justify the creditor in holding the firm liable 1 On principle it would seem not, except so far as that belief may have been induced by the conduct of all or some of the other partners ; in which case those who have so acted may well be. liable personally, having in effect held out the borrowing partner as authorised. But " the mistaken belief that the one partner had that authority " (to appropriate money coming from partner- ship funds to his private account) "cannot prejudice the right of the other, if the other did nothing to induce such a belief " (. Xicltolson v. Ricltctts (18(!0) '2 E. & E. 497, 524 ; Holme v. Hammond (1872) L. R. 7 Ex. 218, 2153. (/) Kciulal v. \\\ml (1871) in Ex. Ch., L. R. Kx. 218. at p. 253, per Montague Smith, J. (//) Ibid., per Lush, J., at p. 251. 638 THE INDIAN CONTRACT ACT. Ss. indorsement of a negotiable instrument by one partner in the name of the 251 253. firm, but without authority and for his own private purposes, confers no title on an indorsee having notice of the purpose and no reason to believe that there is authority (h). 252. Where partners have by contract regulated and Annulment of defined, as between themselves, their rights parSsllXte La anc ^ obligations, suc b contract can be annulled obligations. or altered only by consent of all of them, which consent must either be expressed, or be implied from a uniform course of dealing. Illustration. A., B., and C., intending to enter into partnership, execute written articles of agreement, by which it is stipulated that the net profits arising from the partnership business shall be equally divided between them. Afterwards they carry on the partnership business for many years, A. receiving one-half of the net profits, and the other half being divided equally between B. and C. All parties know of and acquiesce in this arrangement. This course of dealing supersedes the provision in the articles as to the division of profits. Variations by consent. This is elementary law. Perhaps the last few words are the most important. " Partners, if they please, may, in the course of the partnership, daily come to a new arrangement for the purpose of having some addition or alteration in the terms on which they carry on business, provided those additions or alterations be made with the unanimous concurrence of all the partners " (*'). Thus a standing practice of the firm as to the mode of valuing assets (k) or adjusting profit and loss account (I) is binding until altered by consent, whether part of the original agreement or not. 253. In the absence of any contract to the contrary the determinm- 1 ' 6 ^ 0118 ^ partners to each other are deter- ffno m" 1 ^ b y the following rules :- contract to contrary. (i) a \\ partners are joint owners of all (//) (inrlantl \.Jtn-niiih (\.x~!:\) I,. U. S (/.) (\42 THE INDIAN CONTRACT ACT. S. 253. Act, the rules are probably the same in England and in British India. A partner's share does not include advances made by him to the firm beyond his . contributions of capital. Such advances, though postponed to the claims of outside creditors, are as between the partners preferred debts from the firm to the lending partner, and repayable in priority to payment out of capital. In England they carry 5 per cent, interest from their date (P. A. s. 24, sub-s. (3); Lindley, 391); and, subject to any local reason for varying the rate, we presume the same rule would be applied in India. Sub-s. (2) : Share in profits and losses. As this section lays down a presumption in the case of partners as to equality of shares, the burden of proof lies on the party who sets up an agreement to the contrary (d). In England, and presumably here, losses and deficiencies of capital arc to be made up by contribution from the partners in the same way as other losses, namely (in the absence of any more specific agreement) in the proportion in which the partners were entitled to share profits, whether that is or is not the same as the proportion of their capital (e). The assets, after being made up by such contribution, are to be applied, subject to satisfaction first of outside creditors and then of partners' advances, " in paying to each partner rateably what is due from the firm to him in respect of capital, account being taken of the equal contributions [in the case before the Court profits were divisible in equal shares] to be made by him towards the deficiency of capital" (/). That is, his claim for capital is " the value of his original contribution . . . diminished by his share of ... loss" (sub-s. (1), pp. 638, 639, above), and that share is equal if his share of profits would have been equal (sub-s. (2) ). Our Act appears to be in strict accordance with English authorities, though less fully expressed than the English Act. If one partner is insolvent, the burden of his contribution to a loss of capital is not to be thrown on the solvent partners after debts to outside creditors have been paid. A., B., and C. are partners who have contributed capital in unequal shares, but share profits equally. On winding up the business the capital, after satisfying the external debts and advances made by A. and B., is found to be deficient by Rs. 15,000. A. and B. are solvent, and C. is insolvent. A. and B. have to contribute only Rs. 5,000 each, not Rs. 7,500. The remaining capital, increased by these contribu- tions, is divisible between A. and B. in the proportion of their original shares of capital, C. remaining in debt to the firm. There is nothing in 00 Jadobram v. Sulloram (1899) 26 intended to confirm ; Binney v. 3/utrie Cal. 281 ; Keshav v. Rayapa (1875) 12 (1886) 12 App. Ca. 160, 165, J. C., where B. H. C. 165, 171. the rule is treated as clear. 00 Nowell v. Novell (1869) L. K. 7 Eq. (/) Garner v. Murray [1904] 1 Ch. 57, 538. which P. A. s. 44 was doubtless 60. RIGHTS AND DUTIES OF PARTNERS. 643 P. A. s. -t4: "to make a solvent partner liable to contribute for an insolvent S. 253. partner who fails to pay his share" () Garner v. Murray, last note. (K) Surdon v. Earkux (1862) 4 U. F. (//) Exparte Williamson (1869) L. R. 5 & J. 42. Ch. 309, 313; The German Mining Go's (I) Aireij v. Borham (18(51) 29 Beav. Case (1853) 4 D. M. & G. 19, 102 R. R. 7. 620. (0 4 D. M. G. at p. 42, 102 R. R. 19. 412 044 THE INDIAN CONTRACT ACT. S. 253. must have an opportunity of being heard, and the decision must be made in good faith with a view to the collective interest of the firm (m). Being so made, it is conclusive, as in other analogous cases. Not only the nature of the business, but the place where it is carried on, may not be varied without the consent of till the partners (n). Sub-s. (6) : New partners ; assignment of share. The effect of this sub-section ".is not to render an assignment of a share in a partnership concern illegal or void as between the parties to the assignment, but only so far void as between those parties and the other partner or partners as to cause an immediate dissolution of the partnership. In other words, one partner cannot by assigning his share make any one else a partner in his stead with his co-partners ; and therefore upon his assigning his share the partnership ceases to exist, unless the other partners consent to accept the purchaser as a partner in the place of the latter. If they do so consent, the partnership may continue to be carried on as before. If they do not consent, the plaintiff would upon the dissolution (o) have a right to sue, not as a partner, but as an assignee of the rights of his assignor in the partnership property, for an account of that property, and for such a distributive share as belonged to his assignor " (o). Express power for a senior or principal member of a firm to introduce one or more new partners, named or not named, under agreed conditions, is in fact constantly given by partnership articles. A person duly nominated under such a power acquires rights in the partnership property which the Court will enforce by way of appropriate specific relief (/>), though it cannot enforce an agreement to enter into partnership, because the foundation of partnership is mutual confidence, which the Court cannot supply where it does not exist. Though a member of a joint Hindu family cannot sue for an account of the profits of a partnership which is alleged to be joint family property and for an award to him of his share therein (q), he is entitled to an injunction if he is excluded from the management of the family business (r). O) Const v. Horn* (1823) T. & R.496, the Act : P. A. s. 31, for the working of 525, 24 R. R. 108, 132. which see Watts v. Dritcoll [1901] 1 Ch. () One partner alone cannot even 295; Dodson v. Downey [1901] 2 Ch.620 ; renew a lease of the site where the busi- In re (fa ru-ood's Trusts [1903J 1 Ch. 2'M. ness, or part of it, has been carried on : O/) Byrne v. Reid [1902] 2 Ch. 735, Clements v. Xorris (1878) 8 Ch. Div. 129. C. A. (o) Juggut Ckunder v. llada J\'ath () JJacfiului v. SJtaniji (188")) 9 Bom. (he partner himself might at need be 53G, 554. restrained from using copies or extracts (c) See too Great rex \. Cireatrex (1847) made in the exercise of a partner's right 1 De G. & Sm. 692, 75 R. R. 251, and for purposes hostile or injurious to the form of injunction there. interests of his firm : Trego v. Hunt (V7) lieran v. Well [1901] 2 Ch. 59,81, [189G] A. C. 7, 26, Lord Davey. (_'. A. Xot only a partner's agent bat DISSOLUTION OF PARTNERSHIP. 647 (4) when any partner becomes incapable of performing S. 254. his part of the partnership contract : (5) when a partner, other than the partner suing, is guilty of gross misconduct in the affairs of the partnership or towards his partners : (6) when the business of the partnership can only be carried on at a loss. . This section represents with substantial accuracy the established English practice, and P. A. s. 35 has followed it with some little specifying and amplification. In England a partner's bankruptcy works a dissolution without the action of the Court. Sub-s. (3) : Transfer of partner's share by operation of law. The share of a partner in partnership business is "saleable property" within the meaning of s. 266 of the Code of Civil Procedure, and may, therefore, be attached and sold in execution of a decree against him (e). Such a case is within the spirit, if not the letter, of the present sub-section. Sub-s. (5) : " Gross misconduct." These words are perhaps not the most apt to cover all the c'rcumstances in which "such a state of feeling may arise and exist between the partners as to render it impossible that the partnership can continue with advantage to either." It seems that in such a case either partner may claim a dissolution (/'). The Indian Courts are not likely to decline jurisdiction ; they might be astute, at need, to bring the facts within sub-s. (6). Sub-s. (6) : Business carried on at a loss. A contract between a partner and his co-partners for remuneration to the former for the manage- ment of the partnership business by a commission on the sale, during his lifetime, does not, in the absence of any express agreement to that effect, imply a renunciation of the right of the co-partners to dissolve the partner- ship if they find that it cannot be carried on except at a loss ; nor does it imply an obligation to pay the managing partner compensation in case the partnership is dissolved for that reason (8) L. K. 3 t'h. at p. 373. 648 THE INDIAN CONTRACT ACT. Ss. which the plaintiff, having been induced by fraud to buy a share of a 254 256. business, claimed rescission and indemnity besides dissolution, and was held " entitled, in respect of the purchase-money which he had paid, to a lien on the surplus of the partnership assets, after satisfying the partner- ship debts and liabilities," and also to stand in the place of partnership creditors to whom he might have made any payments for debts of the firm (h). 255. A partnership is in all cases dis- Dissolution of i i .<* i-i-ii partnership by pro- solved by its business being prohibited by hibition of business. law. This would not apply to the case of part only of a firm's Business becoming unlawful ; trading with a particular country, for example, might very well be interrupted and forbidden by war while trade with other countries was lawful and within the scope of the partnership. In itself the rule is elementary. Cp. s. 23. 256. If a partnership entered into for a fixed term be Eights and obii- continued after such term has expired, the - rights and obligations of the partners will, in Tt the absence of any agreement to the contrary, was entered into. reina j n the same as they were at the expiration of the term/so far as such rights and obligations can be applied to a partnership dissolvable at the will of any partner. P. A. s. 27, which is slightly different in wording, but to the same effect, adds that continuance of the business without liquidating the partnership affairs is presumed to be a continuance of the partnership. The following provisions have been held applicable to the continuing I'elations of partners holding on after the term : option for a surviving partner to purchase a deceased partner's share at a fixed valuation (i) ; an arbitration clause (If}. The following have been held inconsistent with a partnership at will : requirement of notice a certain time before retiring from the partnership (I) ; option to dissolve the partnership, in special circumstances, on special terms (m). (h) Mycock v. Beatton (1879) 13 Ch. D. Eq. 599. 384. (0 Featherstoitltauitlt v. Fi-nich-lt (1810) (0 Cox v. Willoughly (1880) 13 Ch. D. 17 Yes. 307, 11 R. R, 81. 863. (./) Clark \.Leaclt (18G2) 32 JJeav. \(, (*) GlUett v. Thornton (1875) L. 11. 19 1 DC G. J. & S. 409. GENERAL DUTIES OF PARTNERS. 649 257. Partners are bound to carry on the business of the Ss. General duties of partnership f or the greatest common advantage, ' partners. fo | )e j ug j. anc j f a ithful to each other, and to render true accounts and full information of all things affecting the partnership to an} 7 partner or his legal repre- sentatives. A clause to this effect was formerly common iu partnership articles, but it added nothing to the duties of partners as established in Courts of Equity. To this head may be referred the right of every partner to have access to the partnership books (separately declared by P. A. s. 52, snb-s. (9)) ; it may be exercised through an agent, free from reasonable objection, on the agent undertaking not to misuse the information he acquires ()*. A partner himself must not use extracts from the books to the injury of the firm after he has left it (o). In a transaction between partners for the sale and purchase of a share in the business, if one of them is better acquainted with the accounts than the other, it is his duty to disclose all material facts ; but the party entitled to such disclosure may elect at any stage to waive his right to further information, even if he knows that there had been some concealment of facts which he has since discovered, and believes that other facts are still concealed (p). In other words, his election to affirm the contract or to compromise his claim if he does so elect, is as binding as in the case of any other voidable contract. Account to linn 258. A partner must account to the of benefit derived , ,, -, . -, ,, . from transaction tirm tor any benefit derived from a transaction affecting partner- ^ , , i -, ship. a fleeting the partnership. Illustrations. (a) A., B., and C. are partners in trade. C., without the know- ledge of A. and B.. obtains for his own sole beneiit a lease of the house iu which the partnership business is carried on. A. and B. are entitled to participate, if they please, in the benefit of the lease, [Feat/iensloii- Iiatiyh v. Fen-wick (1810) 17 Ves. 298 ; 11 B. E. 77.] (b) A., B., and U. carry on business together in partnership as merchants trading between Bombay and London. D., a merchant in London, to whom they make their consignments, secretly allows C. a (//) Jlvrnnv.Welli [1901]2Ch. 59, C. A. The settlement held by the Court to be (c) Lord Davey. Trego v. Jhtiit [189*5] tinal was the compromise of an action for A. C. at p. 2G. damages for misrepresentation. O) Law v. Laic [1905] 1 1'h. 140, C. A. 650 THE INDIAN CONTRACT ACT. Ss. share of the commission which he receives upon such consignments in 258, 259. consideration of C.'s using his influence to obtain the consignments for him. C. is liable to account to the firm for the money so received by him. " It is clear law that every partner must accouut to the firm for every benefit derived by him without the consent of his co-partners from any transaction concerning the partnership or from any use by him of the partnership property, name, or business connection " (), above. (*) Clegy v. Mmomhon (1857) 8 D. 31. REVOCATION OF CONTINUING GUARANTEE. 651 promisor undertakes to give his whole time and attention to the partnership Ss. business. 259261. 260. A continuing guarantee, given either to a firm or invocation of to a third person, in respect of the transactions nu!tee U bJ fe cSge in ^ a ^ rm * S ' m ^ ne absence of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which, or in respect of the transactions of which, such guarantee was given. This section is practically a redrafting of 19 & 20 Viet. c. 97 (Mer- cantile Law Amendment Act, 1856), s. 4, and has been adopted almost word for word in P. A. s. 18, the original enactment (which was in affirmance of existing law) (x) being repealed by s. 48. The agreement to the contrary required to displace the effect of this section must be clearly shown. It is not implied in the mere fact that the guarantee is given to a firm whose name has ceased to describe its existing members, and is to secure the balance of a current account (y). Such an intention may be apparent from other circumstances. A bond given to trustees to secure the faithful services of a clerk to an incorporated insurance society having a large number of members, " some of whom might be changed before the wax on the bond was cold," was held enforceable without regard to the identity of the members for the time being, the purpose being clear and the interposition of trustees removing any formal difficulty about parties (z). A case of this kind can hardly occur in modern practice. The one Indian decision reported on this section is in a plain case. A. becomes surety to the firm of "N. C. Mookerji" for B.'s conduct as cashier to the firm. The constitution of the firm is subsequently changed, and its name is altered to "N. Mookerji & Son." A. is not liable for B.'s defalcations subsequent to the change (a). 261. The estate of a partner who has died is not, in Non-iiabiiity of the absence of an express agreement, liable SSffbent in respect of any obligation incurred by the obligations. firm a f ter his d ea th. (a?) There was a corresponding enact- (z) Met calf v. Jiruin (1810) 12 East, ment for Scotland, the intention being to 400, 11 R. R. 432. make the law of Great Britain uniform () Keel Comul Noolterjee v. Bipro Dass beyond a doubt. See per Blackburn, J., (1901) 28 Cal. 597. The only question in the case next cited. really argued was whether the defendant (y) JJacJthouse v. Hull (18G5) G B. & S. was liable on an independent personal 507. guarantee. 052 THE INDIAN CONTRACT ACT. Ss. Cp. P. A. 36 (3). It is immaterial if the obligation was incurred 261, 262. towards a creditor who believed the deceased partner to be living and a member of the firm (6). " It may be taken as a general proposition that the estate of a deceased partner is not liable to third parties for what may be done after his decease by the surviving partners"; but a partner may authorise his executors to continue the business after his death, and may thereby make his whole (c) estate liable to indemnify them for debts contracted in so doing (d). The principles applicable in these cases are really independent of the law of partnership, and even the testator's authority may be dispensed with by the assent of the creditors to the business being carried on (c). 262. Where there are joint debts clue from the partner- Payment of ship, and also separate debts due from any amfof'separate 18 ' partner, the partnership property must be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner must be applied in payment of his separate debts or paid to him. The separate property of any partner must be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm. This is an English rule of administration in bankruptcy which was already fixed in the second quarter of the eighteenth century (e). " It has long been settled in bankruptcy that the joint estate isto be applied in payment of the separate debts, any surplus there may be of either estate being carried over to the other. . . . According to this rule, . . . joint creditors cannot touch the separate estate until after payment in full of the separate debts. They take the surplus only after payment of those debts" if). (i) Himlton's Case in Derayncs v. JVoWtf, " The distinction between joint and etc. (1816) 1 Mer. 529, 616, 15 11. K. 151, separate assets is not restricted to the 169. Nothing in the English Act affects cases of a distribution under a bankruptcy the authority of this decision : Friend v. or insolvency ; it applies equally to the Young [1897] 2 Ch. 421, 428. case of the administration of assets of (c) Dowse v. Gorton [1891] A. C. 190. deceased partners. (W) Lindley, (!21, 622. "In the administration of the assets i.f (c) Lindley, 709. a deceased partner, where both partners (/) Turner, L..T., Lofli/c v. Pritcli<(nl are solvent, there is no distinction made (1803) 1 DC G. J. & S. 610, 613, 614. Sec between joint and several creditors ; they further llidgwaij v. Clare (1854) 19 Beav. are all paid, and in taking the partnei>hip 111,115. The Master of the Rolls' state- accounts the joint debts thus paid will ment is thus summed up in the head- be allowed in account by the surviving note : partner. JOIN! 1 ANT) SEPARATE DEBTS OF PARTNERS. 053 The rule is established in all or nearly all common law jurisdictions, and Ss. is embodied in the English Bankruptcy Act of 1883 (s. 40); but no 262,263. one seems to know the original reasons for its adoption. It is generally disapproved on principle as unduly favouring separate at the expense of joint creditors, and it does not agree with mercantile usage or with the laws of other nations (//). Probably the framcrs of this Act thought it 1 etter to preserve the certain good, so far as it goes, of uniformity with English law than to enact a rule more just in itself, but divergent. The present section is not limited to the case of insolvency, and seems to include by implication the right of every partner, which belongs to the class of equitable (not possessory) liens and is commonly called partners' lien, to have the partnership property duly applied when a dissolution takes place, from whatever cause. This right is separately declared by P. A. s. 39. It is available after dissolution, as between the partners, against one partner who has taken over the assets and business of the firm, but not against former assets in the hands of a purchaser or mortgagee. The con- tinuing partner is bound to apply the remaining assets in' paying the partnership debts, but a purchaser from him in the ordinary course of business deals with him as owner, not as partner, and is not accountable for the application of his money (A). If, however, a surviving or continuing partner makes fresh acquisitions of property in the course of carrying on the business after dissolution, the property so acquired is not subject to the claim of the other partners or their executors, and they will not, in the event of his becoming bankrupt, be entitled to dispute the claim of his creditors thereon (i). continuance of 263. After a dissolution of partnership, ^ e r ight s and obligations of the partners con- thine in all things necessary for winding up the business of the partnership. i; If the estate of the deceased partner the separate estate of each partner after be insolvent, and that of the surviving the claims of his separate creditors have partner solvent, the joint creditors will been satisfied. naturally go against the surviving partner, "If both partners die before adminis- wbo will then be a creditor against the tration takes place, the rule is the same." separate estate of the insolvent partner (. the Trusts Act II v. De Tastet (1821) Jac. 284, 23 R. R. 59 ; of 1882, s. 88, illust. b and/. Crawshay v. Colling (1826) 2 Russ. 325, (t) L. R. 7 H. L. at p. 329. 650 THE INDIAN CONTRACT ACT. Ss. Apart from any such special relation as just mentioned, surviving or 263, 264. continuing partners are not, in the inaccurate phrase which at one time was current, trustees for an outgoing partner or a deceased partner's representatives. Whatever is due on that account is a debt and nothing else than an ordinary debt, "a debt accruing at the date of the dissolution or death " ; so P. A. s. 43 expressly declares, in accordance with English law as settled more than a generation ago ; and as such it is subject to the ordinary law of limitation of actions (it). 264. Persons dealing with a firm will not be affected Notice of dis- by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution. What notice required. This section looks, on the face of it, as if it had been intended to simplify the English rule and abolish its distinction between old and new customers of the firm ; but authoritative interpretation, so far as it has gone, is otherwise. The English law requires that the old customers, who are known to the firm as having dealt with it, shall have actual notice, which is commonly given by circular. But, as regards persons who have not dealt with the firm (or, in other words, the general public), it is impossible in a large community to give any specific notice ; and therefore, as regards them, the most effectual public notice is all that can be required. In England notice published in the London Gazette is sufficient (P. A. s. 36). It is doubtful, however, whether in-India the publication of a notice of dissolution in the Government Gazette is always sufficient public notice for the present purpose. As far back as the year 1882 the High Court of Calcutta was confronted with the problem of ascertaining the true meaning of this section (x). It was contended in that case that the meaning of the section was that persons dealing with a firm, whether old or new customers, were to be bound, in the absence of actual notice to them, by public notice of the dissolution, and that the distinction obtaining in English law as to the character of the notice in the case of old and new customers was done away with. The Court, however, stated that, if it was the intention to introduce such a serious change into the law, the language used would have been much more clear, and it was held that, no express notice of the retirement of the defendant having been given to the plaintiff, who was an old customer of the firm, the defendant was liable to him, though the notice 00 X>w.r v. Gije (1872) L. E. 5 H. L. (x) Chvndee Churn v. Edvljee (1882) 656, see per Lord Westbury at p. 675. 8 Cal. 678. WTND1NG-UP BY COURT ON DISSOLUTION. 657 of dissolution was published in four local papers. As to what is public Ss. notice, the Court stated that it must depend upon circumstances, upon the 264, 265. locality, and whether there are any, and what, newspapers in circulation there, or upon what are the usual means of giving public notice in the neighbourhood (y). It is not necessary, however, to give any notice of dissolution on the retirement of a dormant 'partner (z). 265. Where a partner is entitled to claim a dissolution up by ^ partnership, or where a partnership has terminated, the Court may, in the absence of any contract to the contrary, wind up the business of the partnership, provide for the payment of his debts, and distribute the surplus according to the shares of the partners respectively (a). Amendment. This section is printed as amended by the Indian Contract Act Amendment Act IV of 1886, s. 1. Old Section. The section as it originally stood ran as follows : " In the absence of any contract to the contrary, after the termination of a partnership, each partner or his representatives may apply to the Court to wind up the business of the firm, to provide for the payment of its debts, and to distribute the surplus according to the shares of partners respectively. "Explanation. The Court in this section means a Court not inferior to the Court of a District Judge within the local limits of whose jurisdic- tion the place or principal place of business of the firm is situated." Under the old section it was held, on the one hand, that the section was only ancillary to the ordinary suit for winding up the affairs of a partner- ship, and did not take away the ordinary right of suit in any civil Court having jurisdiction to have the accounts of the partnership taken (6). On the other hand, it was maintained in several cases that the proceedings under that section could only be instituted in the Court of the District Judge and not any Court subordinate thereto (c). Further it was neces- sary under the old section that there should be a previous dissolution of partnership in order to give jurisdiction to the Court to wind up the (y) 8 Cal. at p. 684. (J) Ja-call Rainasami v. Sathamlaliam (z) Eamasami v. Kudar JJibi (188(5) (1877) 1 Mad. 340 ; LuchmanLall v.Sant 9 Mad. 492 ; Hash-mat All v. Lachml Lall (1880) G Cal. 521 ; Ha aha v. Ragho Narain (1908) Puuj. Rec. no. 75. See (1881) Bom. 165. also Itustouiji v. Sket/i Pumliotamdus (<) Rainayyav. Cliandra Se-kara (1882) (1901) 25 Bom. 600, 614 (following 5 Mad. 256 ; Prosad Doss v. Hussick Lall well-known English authorities now (1881) 7 Cal. 157 ; 'Hum f'lnindcrv. Munich embodied in P. A., s. 36 (3)). Chunder (1881) 7 Ci.l. 42S : Jn. 1'. A. s. 39. (trr v. Kada Nath (1884) 10 Cal. 669. i.e. 42 658 THE INDIAN CONTRACT ACT, S. 265. partnership (d). This, however, is not necessary under the present section, and a suit may be brought for dissolution of partnership. Sui for account. No suit will lie, as a general rule, by one partner against another for partnership accounts without praying a dissolution (e). Such was the rule of English Courts of Equity. And when a suit for account is brought all cpnestious arising between the partners out of the partnership transaction should be disposed of in that suit (/). No suit can be maintained by one partner against another in respect of any transaction which forms an item of the partnership account, for such a suit would, from its very nature, involve the taking of the whole* partnership account, and this can only be done in a suit for an account () B. H. C. 165. 12 B. H. C. 97, 107. (y) Bhagtidas v. Oliver (1872) 9 B. H. C. (Z) 25 Bom. 606. 418. (II) Valiant Kondu v. Malupeddi (1908) (h) Rustoniji v. Sheth Purshotamdas 31 Mad. 343, distinguishing Rvstontji v. (1901) 25 Bom. 606. . Nor can one partner Xhdh Purxhotamdas (1'JOl) 25 Bom. GOG. sue another for money received by the APPOINTMENT OF RECEIVER. 659 be a common partner. This doctrine, however, does not rest upon any S. 265. principles of the law of partnership, but is founded on the elementary rule of procedure that the same individual, even in different capacities, cannot be both a plaintiff and a defendant to one and the same action (i). Appointment of receiver. In England the effect of appointing a receiver is, to the extent of the authority delegated to him by the Court, to exclude every one else from exercising the authority of a partner, whether usual or specially regulated by agreement ; and if he is also appointed manager, the whole control of the business is transferred to him, subject to the directions of the Court, whose officer he is. Hence a receiver is seldom appointed when a dissolution is not contemplated (ti), though it can be done (o), and a manager never (p). Where the partnership is already dissolved, it is almost a matter of course, though not a matter of right, to appoint a receiver at the instance of a partner ( The juris- diction "is founded on the common right of persons who are interested in property which is in danger to apply for its protection " (2), and even a O) 25 Bom. at p. 612. O) Hale v. Hale (1841) 4 Beav. 369. O) See Hall v. Hall, 3 Mac. & G. 79, 55 E. K. 107. 87 11. K. 15. 00 Mtidgwickv. Wimble (1843) 6 Beav. (o) Conxt v. Harris (1823) T. & 11. 4%, 41)5, 63 11. 11. 155, where surviving partners 517, 24 II. R. 108, 125, 135. insisted (apparently in good faith, on their (y/) Lindley, 532. construction of the articles) on keeping a (ikara/ijtS ACT, 1893. [CM. 71. 669 (2) In Scotland, failure by the seller to perform any material part of a contract of sale is a breach of contract, which entitles the buyer either within a reasonable time after delivery to reject the goods and treat the contract as repudiated, or to retain the goods and treat the failure to perform such material part as a breach which may give rise to a claim for compensation or damages. (3) Nothing in this section shall affect the case of any condi- tion or warranty, fulfilment of which is excused by law by reason of impossibility or otherwise. 12, In a contract of sale, unless the circumstances of the implied contract are such as to show a different intention, there is as to title, etc. (1) An implied condition on the part of the seller that in the case of a sale he has a right to sell the goods, and that in the case of an agreement to sell he will have a right to sell the goods at the time when the property is to pass : (2) An implied warranty that the buyer shall have and enjoy quiet possession of the goods : (3) An implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party, not declared or known to the buyer before or at the time when the contract is made. 13. Where there is a contract for the sale of goods by descrip- Sale by tion, there is an implied condition that the goods shall correspond with the description; and if the sale be by sample, as well as by description, it is not sufficient that the bulk of the goods corre- sponds with the sample if the goods do not also correspond with the description. 14. Subject to the provisions of this' Act and of any statute Implied in that behalf, there is no implied warranty or condition as to as the quality or fitness for any particular purpose of goods supplied r fitness under a contract of sale, except as follows : (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, "and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose, provided that in the case of a contract for the sale of a specified article under 670 CH. 71.] SALE OF GOOUS ACT, 1893. [56 & 57 VIOT. Sale by sample. Goods must be ascer- tained. Property passes when intended to pass. its patent or other trade name, there is no implied condition as to its fitness for any particular purpose : (2) Where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality ; provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed : (3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (4) An express warranty or condition does not negative a warranty or condition implied by this Act unless incon- sistent therewith. Sale by Sample. 15, (1) A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect. (2) In the case of a contract for sale by sample (a) There is an implied condition that the bulk shall correspond with the sample in quality : (b) There is an implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with the sample : (3) There is an implied condition that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. PART II. EFFECTS OF THE CONTRACT. Transfer of Property as between Seller and Buyer. 16. Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. 17. (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. 56 & 57 YICT.] SALE OF GOODS ACT, 1893. [CH. 71. 671 (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case. 18. Unless a different intention appears, the following are Kules for rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1. Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed. Rule 2. Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state, the property does not pass until such thing be done, and the buyer has notice thereof. Rule 3. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done, and the buyer has notice thereof. Rule 4. When goods are delivered to the buyer on approval or "on sale or return" or other similar terms the property therein passes to the buyer : (a) When he signifies his approval or acceptance to the seller or does any other act adopting tne transaction : (b) If he does not signify his approval or acceptance tc the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. Rule 5. (1) Where there is a contract for the sale of unascer- tained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made : 672 CH. 71.] SALE OJb 1 GOODS ACT, 1893. [oG & 57 VICT. Reservation of right of disposal. llisk primd facie passes with pro- perty. (2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. 19. (1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appro- priation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee or custodier for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. (2) Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is primd facie deemed to reserve the right of disposal. (3) Where the seller of goods draws on the buyer for the price, and transmits the bill of exchange and bill of lading to the buyer together to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange, and if he wrongfully retains the bill of lading the property in the goods does not pass to him. 20. Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk whether delivery has been made or not. Provided that where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault. Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee or custodier of the goods of the other party. Sale by person not the owner. Transfer of Title. 21. (1) Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 673 seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. (2) Provided also that nothing in this Act shall affect (a) The provisions of the Factors Acts, or any enactment enabling the apparent owner of goods to dispose of them as if he were the true owner thereof : (b) The validity of any contract of sale under any special common law or statutory power of sale or under the order of a Court of competent jurisdiction. 22. (1) Where goods are sold in market overt, according to Market overt. the usage of the market, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of any defect or want of title on the part of the seller. (2) Nothing in this section shall affect the law relating to the sale of horses. (3) The provisions of this section do not apply to Scotland. 23. When the seller of goods has a voidable title thereto, but Sa ! e his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller's defect of title. 24. (1) Where goods have been stolen and the offender is Revesting of prosecuted to conviction, the property in the goods so stolen stolen 1 oods revests in the person who was the owner of the goods, or his n conviction personal representative, notwithstanding any intermediate dealing with them, whether by sale in market overt or otherwise. (2) Notwithstanding any enactment to the contrary, where goods have been obtained by fraud or other wrongful means not amounting to larceny, the property in such goods shall not revest in the person who was the owner of the goods, or his personal representative, by reason only of the conviction of the offender. (3) The provisions of this section do not apply to Scotland. 25. (1) Where a person having sold goods continues or is in Seller or possession of the goods, or of the documents of title to the goods, p^Lfon the delivery or transfer by that person, or by a mercantile agent after sale. acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. i.c. 43 674 CH. 71.] SALE OF GOODS ACT, 1893. [56 & 57 VICT Effect of writs of execution. (2) Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and with- out notice of any lien or other right of the original seller in respect of the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner. (3) In this section the term " mercantile agent " has the same meaning as in the Factors Acts. 26. (1) A writ of fieri facias or other writ of execution against goods shall bind the property in the goods of the execu- tion debtor as from the time when the writ is delivered to the sheriff to be executed ; and, for the better manifestation of such time, it shall be the duty of the sheriff, without fee, upon the receipt of any such writ to endorse upon the back thereof the hour, day, month, and year when he received the same. Provided that no such writ shall prejudice the title to such goods acquired by any person in good faith and for valuable consideration, unless such person had at the time when he acquired his title notice that such writ or any other writ by virtue of which the goods of the execution debtor might be seized or attached had been delivered to and remained unexecuted in the hands of the sheriff. (2) In this section the term "sheriff" includes any officer charged with the enforcement of a writ of execution. (3) The provisions of this section do not apply to Scotland. Duties of seller and buyer. Payment and delivery are concurrent conditions. PAET III. PEEFOEMANCB OF THE CONTRACT. 27. It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. 28. Unless otherwise agreed, delivery of the goods and pay- ment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 675 ready and willing to pay the price in exchange for possession of the goods. 29. (1) Whether it is for the buyer to take possession of the Rules as to goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, the place of delivery is the seller's place of business, if he have one, and if not, his residence : provided that, if the contract be for the sale of specific goods, which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery. (2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. (3) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf ; provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods. (4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. (5) Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. 30. (1) Where the seller delivers to the buyer a quantity of Delivery of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he must pay for them at the contract rate. (2) Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. (3) Where the seller delivers to the buyer the goods he con- tracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or he may reject the whole. (4) The provisions of this section are subject to any usage of trade, special agreement, or course of dealing between the parties. 432 CH. 71.] SALE OF GOODS ACT, 1893. [56 & 57 VICT. Instalment deliveries. Delivery to carrier. Risk where goods are delivered at distant place. Buyer's right of examining the goods. 31. (1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. (2) Where there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circum- stances of the case, whether the breach of contract is a repudia- tion of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated. 32. (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is primd facie deemed to be a delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages. (3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, under circum- stances in which it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their sea transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk during such sea transit. 33. Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer must, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit. 34. (1) Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. (2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is hound, on request, to afford the 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 677 buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. 35. The buyer is deemed to have accepted the goods when he Acceptance, intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. 36. Unless otherwise agreed, where goods are delivered to the Buyer not buyer, and he refuses to accept them, having the right so to do, return re- he is not bound to return them to the seller, but it is sufficient i ected goods, if he intimates to the seller that he refuses to accept them. 37. When the seller is ready and willing to deliver the goods, Liability of and requests the buyer to take delivery, and the buyer does not neglecting within a reasonable time after such request take delivery of the j 1 goods, he is liable to the seller for any loss occasioned by his goods, neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods. Provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract. PART IV. RIGHTS OF UNPAID SELLER AGAINST THE GOODS. 38. (1) The seller of goods is deemed to be an "unpaid Unpaid seller seller " within the meaning of this Act (a) When the whole of the price has not been paid or tendered ; (b) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the con- dition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. (2) In this part of this Act the term " seller " includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been indorsed, or a consignee or agent who has himself paid, or is directly responsible for, the price. 39. (1) Subject to the provisions of this Act, and of any Unpaid statute in that behalf, notwithstanding that the property in the rights. 678 CH. 71.] SALE OP GOODS ACT, 1893. [56 & 57 VtCT. Attachment by seller in Scotland. Seller's lien. goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law (a) A lien on the goods or right to retain them for the price while he is in possession of them ; (b) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them ; (c) A right of re- sale as limited by this Act. (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transitu where the property has passed to the buyer. 40. In Scotland a seller of goods may attach the same while in his own hands or possession by arrestment or poinding ; and such arrestment or poinding shall have the same operation and effect in a competition or otherwise as an arrestment or poinding by a third party. Unpaid Seller's Lien. 41. (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely: (a) Where the goods have been sold without any stipulation as to credit ; (b) Where the goods have been sold on credit, but the term of credit has expired ; (c) W 7 here the buyer becomes insolvent. (2) The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee or custodier for the buyer. Part delivery. 42. Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien or retention on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien or right of retention. 43. (1) The unpaid seller of goods loses his lien or right of retention thereon (a) When he delivers the goods to a carrier or other bailee or custodier for the purpose of transmission to the buyer without reserving the right of disposal of the goods ; Termination of lien. 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 679 (b) When the buyer or his agent lawfully obtains possession of the goods; (c) By waiver thereof. (2) The unpaid seller of goods, having a lien or right of reten- tion thereon, does not lose his lien or right of retention by reason only that he has obtained judgment or decree for the price of the goods. Stoppage in transitu. 44. Subject to the provisions of this Act, when the buyer of R'g ht of . goods becomes insolvent, the unpaid seller who has parted with transitu. the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods as long as they are in course of transit, and may retain them until payment" or tender of the price. 45. (1) Goods are deemed to be in course of transit from the Duration of time when they are delivered to a carrier by land or water, or other bailee or custodier for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, takes delivery of them from such carrier or other bailee or custodier. (2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. (3) If, after the arrival of the goods at the appointed destina- tion, the carrier or other bailee or custodier acknowledges to the buyer, or his agent, that he holds the goods on his behalf and continues in possession of them as bailee or custodier for the buyer, or his agent, the transit is at an end, and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer, and the carrier or other bailee or custodier continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. (5) When goods are delivered to a ship chartered by the buyer it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier, or as agent to the buyer. (6) Where the carrier or other bailee or custodier wrongfully refuses to deliver the goods to the buyer, or his agent in that behalf, the transit is deemed to be at an end. (7) Where part delivery of the goods has been made to the buyer, or his agent in that behalf, the remainder of the goods 680 CH. 71.] SALE OF GOODS ACT, 1893. [56 & 57 VICT. How stoppage in transitu is effected. Effect of sub-sale or pledge by buyer. Sale not generally rescinded by lien or slop- page in transitu. may be stopped in transitu, unless such part delivery has been made under such circumstances as to show an agreement to give up possession of the whole of the goods. 46. (1) The unpaid seller may exercise his right of stoppage in transitu either by taking actual possession of the goods, or by giving notice of his claim to the carrier or other bailee or custodier in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the latter case the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to his servant or agent in time to prevent a delivery to the buyer. (2) When notice of stoppage in transitu is given by the seller to the carrier, or other bailee or custodier in possession of the goods, he must re-deliver the goods to, or according to the direc- tipns of, the seller. The expenses of such re-delivery must be borne by the seller. Re-sale by Buyer or Seller. 47. Subject to the provisions of this Act, the unpaid seller's right of lien or retention or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto. Provided that where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, then, if such last-mentioned transfer was by way of sale the unpaid seller's right of lien or retention or stoppage in transitu is defeated, and if such last-mentioned transfer was by way of pledge or other disposition for value, the unpaid seller's right of lien or retention or stoppage in transitu can only be exercised subject to the rights of the transferee. 48. (1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or retention or stoppage in transitu. (2) Where an unpaid seller who has exercised his right of lien or retention or stoppage in transitu re-sells the goods, the buyer acquires a good title thereto as against the original buyer. (3) Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to re- sell, 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 681 and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract. (4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and on the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim the seller may have for damages. PAKT V. ACTIONS FOR BREACH OF THE CONTRACT. Remedies of the Seller. 49. (1) Where, under a contract of sale, the property in the Action for goods has passed to the buyer, and the buyer wrongfully neglects pnce ' or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods. (2) Where, under a contract of sale, the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed, and the goods have not been appropriated to the contract. (3) Nothing in this section shall prejudice the right of the seller in Scotland to recover interest on the price from the date of tender of the goods, or from the date on which the price was payable, as the case may be. 50. (1) Where the buyer wrongfully neglects or refuses to Damages for accept and pay for the goods, the seller may maintain an action acceptance against him for damages for non-acceptance. (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract. (3) Where there is an available market for the goods in question the measure of damages is primd facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept. 682 CH. 71.] SALE OF GOODS ACT, 1893. [56 & 57 VICT. Damages for non-delivery. Specific per- formance. Remedy for breach of warranty. Remedies of the Buyer. 51. (1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery. (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract. (8) Where there is an available market for the goods in question the measure of damages is priinii facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver. 52. In any action for breach of contract to deliver specific or ascertained goods the Court may, if it thinks fit, on the appli- cation of the plaintiff, by its judgment or decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price, and otherwise, as to the Court may seem just, and the application by the plaintiff may be made at any time before judgment or decree. The provisions of this section shall be deemed to be supplemen- tary to, and not in derogation of, the right of specific implement in Scotland. 53. (1) Where there is a breach of warranty by the seller, or where the buyer elects, or is compelled, to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods ; but he may (a) set up against the seller the breach of warranty in diminution or extinction of the price; or (b) maintain an action against the seller for damages for the breach of warranty. (2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty. (8) In the case of breach of warranty of quality such loss is primd facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 683 (4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent him from maintaining an action for the same breach of warranty if he has suffered further damage. (5) Nothing in this section shall prejudice or affect the buyer's right of rejection in Scotland as declared by this Act. 54. Nothing in this Act shall affect the right of the buyer or interest and the seller to recover interest or special damages in any case damages. where by law interest or special damages may be recoverable, or to recover money paid where the consideration for the payment of it has failed. PAKT VI. SUPPLEMENTARY. 55. Where any right, duty, or liability would arise under a Exclusion of contract of sale by implication of law, it may be negatived or a^con-^ varied by express agreement or by the course of dealing between ditions. the parties, or by usage, if the usage be such as to bind both parties to the contract. 56. Where, by this Act, any reference is made to a reasonable Reasonable time the question what is a reasonable time is a question of fact, tio^oflaet." 57. Where any right, duty, or liability is declared by this Act, Rights, &c., it may, unless otherwise by this Act provided, be enforced by faction 16 action. 58. In the case of a sale by auction Auction sales. (1) Where goods are put up for sale by auction in lots, each lot is primd facie deemed to be the subject of a separate contract of sale: (2) A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner. Until such announcement is made any bidder may retract his bid : (3) Where a sale by auction is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person. Any sale contra- vening this rule may be treated as fraudulent by the buyer. (4) A sale by auction may be notified to be subject to a reserved or upset price, and a right to bid may also be reserved expressly by or on behalf of the seller. 684 CH. 71.] SALE OF GOODS ACT, 1893. [56 & 57 VIOT. Payment into Court in Scotland when breach of warranty alleged. Repeal. Savings. Interpreta- tion of terms. Where a right to bid is expressly reserved, but not otherwise, the seller, or any one person on his behalf, may bid at the auction. 59. In Scotland where a buyer has elected to accept goods which he might have rejected, and to treat a breach of contract as only giving rise to a claim for damages, he may, in an action by the seller for the price, be required, in the discretion of the Court before which the action depends, to consign or pay into Court the price of the goods, or part thereof, or to give other reasonable security for the due payment thereof. 60. The enactments mentioned in the schedule to this Act are hereby repealed as from the commencement of this Act to the extent in that schedule mentioned. Provided that such repeal shall not affect anything done or suffered, or any right, title, or interest acquired or accrued before the commencement of this Act, or any legal proceeding or remedy in respect of any such thing, right, title, or interest. 61. (1) The rules in bankruptcy relating to contracts of sale shall continue to apply thereto, notwithstanding anything in this Act contained. (2) The rules of the common law, including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, and in particular the rules relating to the law of principal and agent and the effect of fraud, misrepresentation, duress or coercion, 'mistake, or other invalidating cause, shall continue to apply to contracts for the sale of goods. (3) Nothing in this Act or in any repeal effected thereby shall affect the enactments relating to bills of sale, or any enactment relating to the sale of goods which is not expressly repealed by this Act. (4) The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way of mortgage, pledge, charge, or other security. (5) Nothing in this Act shall prejudice or affect the landlord's right of hypothec or sequestration for rent in Scotland. 62. (1) In this Act, unless the context or subject-matter otherwise requires, " Action " includes counterclaim and set off, and in Scotland condescendence and claim and compensation : " Bailee " in Scotland includes custodier : "Buyer " means a person who buys or agrees to buy goods : 56 & 57 VICT.] SALE OF GOODS ACT, 1893. [CH. 71. 685 "Contract of sale" includes an agreement to sell as well as a sale : " Defendant " includes in Scotland defender, respondent, and claimant in a multiplepoinding : "Delivery " means voluntary transfer of possession from one person to another : " Document of title to goods " has the same meaning as it has in the Factors Acts : " Factors Acts " mean the Factors Act, 1889, the Factors 52 & 53 Viet. (Scotland) Act, 1890, and any enactment amending or l'^' substituted for the same : c - 40 - " Fault " means wrongful act or default : " Future goods " mean goods to be manufactured or acquired by the seller after the making of the contract of sale :. " Goods " includes all chattels personal other than things in action and money, and in Scotland all corporeal moveables except money. The term includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale : " Lien" in Scotland includes right of retention : "Plaintiff" includes pursuer, complainer, claimant in a mul- tiplepoinding and defendant or defender counterclaiming : "Property" means the general property in goods, and not merely a special property : " Quality of goods " includes their state or condition : " Sale " includes a bargain and sale as well as a sale and delivery : " Seller " means a person who sells or agrees to sell goods : " Specific goods " means goods identified and agreed upon at the time a contract of sale is made : " Warranty" as regards England and Ireland means an agree- ment with reference to goods which are the subject of a contract of sale, but collateral to the main purpose of such contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated. As regards Scotland a breach of warranty shall be deemed to be a failure to perform a material part of the contract. (2) A thing is deemed to be done " in good faith " within the meaning of this Act when it is in fact done honestly, whether it be done negligently or not. 686 CH. 71.] SALE OF GOODS ACT, 1893. [56 & 57 VICT. Commence- ment. Short title. (8) A person is deemed to be insolvent within the meaning of this Act who either has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of bankruptcy or not, and whether he has become a notour bankrupt or not. (4) Goods are in a " deliverable state " within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them. 63. This Act shall come into operation on the first day of January one thousand eight hundred and ninety-four. 4. This Act may be cited as the Sale of Goods Act, 1893. Section 60. SCHEDULE. This schedule is to be read as referring to the revised edition of the statutes prepared under the direction of the Statute Law Committee. ENACTMENTS REPEALED. Session and Chapter. 1 Jac. 1, c. 21 29 Cha. 2, c. 3 S Geo. 4, c. H 19 & 20 Viet. c. 60. 19 & 20 Viet. c. 97. Title of Act and Extent of Repeal. An Act against brokers. The whole Act. An Act for the prevention of frauds and perjuries. In part ; that is to say, sections fifteen and sixteen (a). An Act for rendering a written memorandum necessary to the validity of certain promises and engagements. In part ; that is to say, section seven. The Mercantile Law Amendment (Scotland) Act, 1856. In part ; that is to say, sections one, two. three, four and five. The Mercantile Law Amendment Act, 1856. In part ; that is to say, sections one and two. (a) Commonly cited as sections sixteen and seventeen. PAKTNEKSHIP ACT, 1890. 53 & 54 VICT. c. 39. ARRANGEMENT OF SECTIONS. Nature of Partnership. Section. 1. Definition of partnership. 2. Rules for determining existence of partnership. 3. Postponement of rights of person lending or selling in consideration of share of profits in case of insolvency. 4. Meaning of firm. Relations of Partners to persons dealing ivith them. 5. Power of partner to bind the firm. 6. Partners bound by acts on behalf of firm. 7. Partner using credit of firm for private purposes. 8. Effect of notice that firm will not be bound by acts of partner. 9. Liability of partners. 10. Liability of the firm for wrongs. 11. Misapplication of money or property received for or in custody of the firm. 12. Liability for wrongs joint and several. 13. Improper employment of trust-property for partnership purposes. 14. Persons liable by "holding out." 15. Admissions and representations of partners. 16. Notice to acting partner to be notice to the firm. 17. Liabilities of incoming and outgoing partners. 18. Revocation of continuing guaranty by change in firm. Relations of Partners to one another. 19. Variation by consent of terms of partnership. 20. Partnership property. 21. Property bought with partnership money. 22. Conversion into personal estate of land held as partnership property. 23. Procedure against partnership property for a partner's separate judgment debt. 24. Rules as to interests and duties of partners subject to special agreement. 688 CH/39.] PARTNERSHIP ACT, 1890. [53 & 54 Y1CT. Section. 25. Expulsion of partner. 26. Retirement from partnership at will. 27. Where partnership for term is continued over, continuance on old terms presumed. 28. Duty of partners to render accounts, &c. 29. Accountability of partners for private profits. 30. Duty of partner not to compete with firm. 31. Rights of assignee of share in partnership. Dissolution of Partnership, and its consequences. 32. Dissolution by expiration or notice. 33. Dissolution by bankruptcy, death, or charge. 34. Dissolution by illegality of partnership. 35. Dissolution by the Court. 36. Rights of pei-sous dealing with firm against apparent members of firm. 37. Right of partners to notify dissolution. 38. Continuing authority of partners for purposes of winding up. 39. Rights of partners as to application of partnership property. 40. Apportionment of premium where partnership prematurely dis- solved. 41. Rights where partnership dissolved for fraud or misrepresentation. 42. Right of outgoing partner in certain cases to share profits made after dissolution. 43. Retiring or deceased partner's share to be a debt. 44. Rule for distribution of assets on final settlement of accounts. Supplemental. 45. Definitions of " Court " and " business." 46. Saving for rules of equity and common law. 47. Provision as to bankruptcy in Scotland. 48. Repeal. 49. Commencement of Act. 50. Short title. SCHEDULE. An Act to declare and amend the Law of Partnership. [14th August, 1890.] BE it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : 53 & 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 689 Nature of Partnership. 1. (1) Partnership is the relation which subsists between Definition of persons carrying on a business in common with a view of profit. P artner:5 J P- (2) But the relation between members of any company or association which is (a) Eegistered as a company under the Companies Act, 1862, 25 & 26 Viet. or any other Act of Parliament for the time being in force and relating to the registration of joint stock companies; or (b) Formed or incorporated by or in pursuance of any other Act of Parliament or letters patent, or Eoyal Charter ; or (c) A company engaged in working mines within and subject to the jurisdiction of the Stannaries : is not a partnership within the meaning of this Act. 2. In determining whether a partnership does or does not Rules for exist, regard shall be had to the following rules : existence 1 "! (1) Joint tenancy, tenancy in common, joint property, common partnership. property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof. (2) The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived. (3) The receipt by a person of a share of the profits of a business is primd facie evidence that he is a partner in the business, but the receipt of such a share, or of a payment contingent on or varying with the profits of a business, does not of itself make him a partner in the business ; and in particular (a) The receipt by a person of a debt or other liquidated amount by instalments or otherwise out of the accruing profits of a business does not of itself make him a partner in the business or liable as such : (b) A contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such : i.e. 44 090 CH. 39.] PARTNERSHIP ACT, 1890. [53 & 54 VICt. (c) A person being the widow or child of a deceased partner, and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner, is not by reason only of such receipt a partner in the business or liable as such: (d) The advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such- Provided that the contract is in writing, and signed by or on behalf of all the parties thereto : (e) A person receiving by way of annuity or otherwise a portion of the profits of a business in considera- tion of the sale by him of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such. 3. In the event of any person to whom money has been advanced J wav ^ ^ oan u P on sucn a contract as is mentioned in the last ing or selling foregoing section, or of any buyer of a goodwill in consideration tion^simre of a share of the profits of the business, being adjudged a bank- of profits in rupt, entering into an arrangement to pay his creditors less than case of msol- . . ..... vency. twenty shillings in the pound, or dying m insolvent circumstances the lender of the loan shall not be entitled te recover anything in respect of his loan, and the seller of the goodwill shall not be entitled to recover anything in respect of the share of profits contracted for, until the claims of the other- creditors of the borrower or buyer for valuable consideration in money or money's worth have been satisfied. Meaning of 4. (1) Persons who have entered into partnership with one another are for the purposes of this Act called collectively a firm, and the name under which their business is carried on is called the firm-name. (2) In Scotland a firm is a legal person distinct from the partners of whom it is composed, but an individual partner may be charged on a- decree or diligence directed against the firm, and on payment of the debts is entitled to relief pro rata from the firm and its other members. 53& 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 691 Relations of Partners to persons dealing with them. 5. Every partner is an agent of the firm and his other partners Power of for the purpose of the business of the partnership ; and the acts bhuUhe^firm. of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority, or does not know or believe him to be a partner. 6. An act or instrument relating to the business of the firm Partners and done or executed in the firm-name, or in any other manner showing an intention to bind the firm, by any person thereto firm, authorised, whether a partner or not, is binding on the firm and all the partners. Provided that this section shall not affect any general rule of law relating to the execution of deeds or negotiable instruments. 7. Where one partner pledges the credit of the firm for a Partner using purpose apparently not connected with the firm's ordinary course fo^ritate of business, the firm is not bound, unless he is in fact specially purposes. authorised by the other partners ; but this section does not affect" any personal liability incurred by an individual partner. 8. If it has been agreed between the partners that any Effect of restriction shall be placed on the power of any one or more of fir^wm^ot them to bind the firm no act done in contravention of the agree- be bound by ment is binding on the firm with respect to persons having notice partner, of the agreement. 9. Every partner in a firm is liable jointly with the other Liability of partners, and in Scotland severally also, for all debts and obliga- P artners - tions of the firm incurred while he is a partner ; and after his death his estate is also severally liable in a due course of % administration for such debts and obligations, so far as they remain unsatisfied, but subject in England or Ireland to the prior payment of his separate debts. 10. Where, by any wrongful act or omission of any partner Liability of acting in the ordinary course of the business of the firm, or with for the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act. 442 692 CH. 39.] PARTNERSHIP ACT, 1890. [53 & 54 ViCT. Misappiica- orproperty ey received for or in custody of the firm. Liability for Improper employment of trust- property for partnership purposes. Persons liable by " holding out." Admissions sentations of partners. 11. In the following cases ; namely ( a ) Where one partner acting within the scope of his apparent authority receives the money or property of a third * J r r J person and misapplies it ; and (b) Where a firm in the course of its business receives money or property of a third person, and the money or property so received is misapplied by one or more of the partners wkile it is in the custody of the firm ; the firm is liable to make good the loss. 12. Every partner is liable jointly with his co-partners and a ^ so severa ^y ^ or everything for which the firm while he is a partner therein becomes liable under either of the two last preceding sections. 13. If a partner, being a trustee, improperly employs trust- property in the business or on the account of the partnership, no other partner is liable for the trust-property to the persons beneficially interested therein. Provided as follows : (1) This section shall not affect any liability incurred by any partner by reason of his having notice of a breach of trust; and (2) Nothing in this section shall prevent trust money from being followed and recovered from the firm if still in its possession or under its -control. 14. (1) Every one who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representa- tion given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made. (2) Provided that where after a partner's death the partnership business is continued in the old firm-name, the continued use of that name or of the deceased partner's name as part thereof shall not of itself make his executors or administrators estate or effects liable for any partnership debts contracted after his death. 15. An admission or representation made by any partner concerning the partnership affairs, and in the ordinary course of its business, is evidence against the firm. 53 & 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 693 16. Notice to any partner who habitually acts in the partnership Notice to business of any matter relating to partnership affairs operates as partner to bo notice to the firm, except in the case of a fraud on the firm notice to the committed by or with the consent of that partner. 17. (1) A person who is admitted as a partner into an Liabilities of existing firm does not thereby become liable to the creditors a of the firm for anything done before he became a partner. partners. (2) A partner who retires from a firm does not therSby cease to be liable for partnership debts or obligations incurred before his retirement. (3) A retiring partner may be discharged from any existing liabilities, by an agreement to that effect between himself and the members of the firm as newly constituted and the creditors, and this agreement may be either express or inferred as a fact from the course of dealing between the creditors and the firm as newly constituted. 18. A continuing guaranty or cautionary obligation given Revocation either to a firm or to a third person in respect of the transactions g U aranty U by g of a firm is, in the absence of agreement to the contrary, revoked change in as to future transactions by any change in the constitution of the firm to which, or of the firm in respect of the transactions of which, the guaranty or obligation was given. Relations of Partners to one another.^ 19. The mutual rights and duties of partners, whether Variation by ascertained by agreement or defined by this Act, may be varied te^j^of by the consent of all the partners, and such consent may be partnership, either express or inferred from a course of dealing. 20. (1) All property and rights and interests in property Partnership originally brought into the partnership stock or acquired, P r P ert y- whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement. (2) Provided that the legal estate or interest in any land, or in Scotland the title to and interest in any heritable estate, which belongs to the partnership shall devolve according to the nature and tenure thereof, and the general rules of law thereto applicable, but in trust, so far as necessary, for the persons beneficially interested in the land under this section. 694 CH. 39.] PARTNERSHIP ACT, 1890. [53 & 54 VICT. Property bought with partnership money. Conversion into personal estate of land held as partnership property. Procedure against partnership property for a partner's separate judgment debt. (8) Where co-owners of an estate or interest in any land, or in Scotland of any heritable estate, not being itself partnership property, are partners as to profit made by the use of that land or estate, and purchase other land or estate out of the profits to be used in like manner, the land or estate so purchased belongs to them, in the absence of an agreement to the contrary, not as partners, but as co-owners for the same respective estates and interests as are held by them in the land or estate first mentioned at the date of the purchase. 21. Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm. 22. Where land or any heritable interest therein has become partnership property, it shall, unless the contrary intention appears, be treated as between the partners (including the representatives of a deceased partner), and also as between the heirs of a deceased partner and his executors or administrators, as personal or moveable and not real or heritable estate. 23. (1) After the commencement of this Act a writ of execution shall not issue against any partnership property except on a judgment against the firm. (2) The High Court, or a judge thereof, or the Chancery Court of the county palatine of Lancaster, or a county court, may, on the application by summons of any judgment creditor of a partner, make an order charging that partner's interest in the partnership property and profits with payment of the amount of the judgment debt and interest thereon, and may by the same or a subsequent order appoint a receiver of that partner's share of profits (whether already declared or accruing), and of any other money which may be coming to him in respect of the partnership, and direct all accounts and inquiries, and give all other orders and directions which might have been directed or given if the charge had been made in favour of the judgment creditor by the partner, or which the circumstances of the case may require. (3) The other partner or partners shall be at liberty at any time to redeem the interest charged, or in case of a sale being directed, to purchase the same. (4) This section shall apply in the case of a cost-book company as if the company were a partnership within the meaning of this Act. (5) This section shall not apply to Scotland. 53 & 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 695 24. The interests of partners in the partnership property and Rules as to their rights and duties in relation to the partnership shall be duties of determined, subject to any agreement express or implied between partners sub- the partners, by the following rules : agreement. (1) All the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses whether of capital or otherwise sustained by the firm. (2) The firm must indemnify every partner in respect of pay- ments made and personal liabilities incurred by him (a) In the ordinary and proper conduct of the business of the firm ; or, (b) In or about anything necessarily done for the preservation of the business or property of the firm. (3) A partner making, for the purpose of the partnership, any actual payment or advance beyond the amount of capital which he has agreed to subscribe, is entitled to interest at the rate of five per cent, per annum from the date of the payment or advance. (4) A partner is not entitled, before the ascertainment of profits, to interest on the capital subscribed by him. (5) Every partner ma}' take part in the management of the partnership business. (6) No partner shall be entitled to remuneration for acting in the partnership business. (7) No person may be introduced as a partner without the consent of all existing partners. (8) Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners, but no- change may be made in the nature of the partnership business without the consent of all existing partners. (9) The partnership books are to be kept at the place of business of the partnership (or the principal place, if there is more than one), and every partner may, when he thinks fit, have access to and inspect and copy any of them. 25. No majority of the partners can expel any partner unless Expulsion of a power to do so has been conferred by express agreement P artner - between the partners. 26. (1) Where no fixed term has been agreed upon for the Retirement duration of the partnership, any partner may determine the ne^i^lt will, 696 CH. 39.] PARTNERSHIP ACT, 1890. [53 & 54 VICT. Where part- nership for term is con- tinued over, continuance on old terms presumed. Duty of partners to render accounts, &c. Account- ability of partners for private profits. Duty of partner not to compete with firm. Rights of assignee of share in partnership. partnership at any time on giving notice of his intention so to do to all the other partners. (2) Where the partnership has originally been constituted by deed, a notice in writing, signed by the partner giving it, shall be sufficient for this purpose. 27. (1) Where a partnership entered into for a fixed term is continued after the term has expired, and without any express new agreement, the rights and duties of the partners remain the same as they were at the expiration of the term, so far as is consistent with the incidents of a partnership at will. (2) A continuance of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is presumed to be a continuance of the partnership. 28. Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives. 29. (1) Every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership, or from any use by him of the partnership property, name or business connexion. (2) This section applies also to transactions undertaken after a partnership has been dissolved by the death of a partner, and before the affairs thereof have been completely wound up, either by any surviving partner or by the representatives of the deceased partner. 30. If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business. 31. (1) An assignment by any partner of his share in the partnership, either absolute or by way of mortgage or redeemable charge, does not, as against the other partners, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any accounts of the partnership transactions, or to inspect the partnership books, but entitles the assignee only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must accept the account of profits agreed to by the partners. 53 & 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 697 (2) In case of a dissolution of the partnership, whether as respects all the partners or as respects the assigning partner, the assignee is entitled to receive tbe share of the partnership assets to which the assigning partner is entitled as between himself and the other partners, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution. Dissolution of Partnership, and its consequences. 32. Subject to any agreement between the partners, a partner- Dissolution ship is dissolved- ^n e o x ati0 (a) If entered into for a fixed term, by the expiration of that term : (b) If entered into for a single adventure or undertaking, by the termination of that adventure or undertaking : (c) If entered into for an undefined time, by any partner giving notice to the other or others of his intention to dissolve the partnership. In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or if no date is so mentioned, as from the date of the communication of the notice. 33. (1) Subject to any agreement between the partners, every Dissolution partnership is dissolved as regards all the partners by the death b J bank - J ruptcy, or bankruptcy of any partner. death, or (2) A partnership may, at the option of the other partners, char e - be dissolved if any partner suffers his share of the partner- ship property to be charged under this Act for his separate debt. 34. A partnership is in every case dissolved by the happening Dissolution of any event which makes it unlawful for the business of the b j lllc g allt y * of partner- firm to be carried on or for the members of the firm to carry it ship. on in partnership. 35. On application by a partner the Court may decree a dis- Dissolution solution of the partnership in any of the following cases : (a) When a partner is found lunatic by inquisition, or in Scotland by cognition, or is shown to the satisfaction of the Court to be of permanently unsound mind, in either of which cases the application may be made as well on behalf of that partner by his committee or next friend or person having title to intervene as by any other partner : 698 CH. 39.] PARTNERSHIP ACT, 1890. [53 & 54 VICT. Rights of persons deal- ing with firm against apparent members of firm. Right of partners to notify dissolution. Continuing authority of partners for (b) When a partner, other than the partner suing, becomes in any other way permanently incapable of performing his part of the partnership contract : (c) When a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of the Court, regard being had to the nature of the business, is calculated to prejudicially affect the carrying on of the business : (d) When a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him : (e) When the business of the partnership can only be carried on at a loss : (f) Whenever in any case circumstances have arisen which, in the opinion of the Court, render it just and equitable that the partnership be dissolved. 36. (1) Where a person deals with a firm after a change in its constitution he is entitled to treat all apparent members of the old firm as still being members of the firm until he has notice of the change. (2) "An advertisement in the London Gazette as to a firm whose principal place of business is in England or Wales, in the Edinburgh Gazette as to a firm whose principal place of business is in Scotland, and in the Dublin Gazette as to a firm whose principal place of business is in Ireland, shall be notice as to persons who had not dealings with the firm before the date of the dissolution or change so advertised. (3) The estate of a partner who dies, or who becomes bankrupt, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable for partnership debts contracted after the date of the death, bankruptcy, or retirement respectively. 37. On the dissolution of a partnership or retirement of a partner any partner may publicly notify the same, and may require the other partner or partners to concur for that purpose in all necessary or proper acts, if any, which cannot be done without his or their concurrence. 38. After the dissolution of a partnership the authority of each partner to bind the firm, and the other rights and obliga- 53 & 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 699 tions of the partners, continue notwithstanding the dissolution purposes of so far as may be necessary to wind up the affairs of the partner- wmdm s U P- ship, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise. Provided that the firm is in no case bound by the acts of a partner who has become bankrupt ; but this proviso does not affect the liability of any person who has after the bankruptcy represented himself or knowingly suffered himself to be repre- sented as a partner of the bankrupt. 39. On the dissolution of a partnership every partner is Rights of entitled, as against the other partners in the firm, and all persons application of claiming through them in respect of their interests as partners, partnership to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm ; and for that purpose any partner or his representatives may on the termination of the partnership apply to the Court to wind up the business and affairs of the firm. 40. Where one partner has paid a premium to another on Apportion- entering into a partnership for a fixed term, and the partnership premium is dissolved before the expiration of that term otherwise than by whe ^ part- nersnip the death of a partner, the Court may order the repayment of prematurely the premium, or of such part thereof as it thinks just, having d regard to the terms of the partnership contract and to the length of time during which the partnership has continued ; unless (a) the dissolution is, in the judgment of the Court, wholly or chiefly due to the misconduct of the partner who paid the premium, or (b) the partnership has been dissolved by an agreement con- taining no provision for a return of any part of the premium. 41. Where a partnership contract is rescinded on the ground Rights where of the fraud or misrepresentation of one of the parties thereto, dfssoived^for the party entitled to rescind is, without prejudice to any other fraud or -14. 4-4.1 j misrepre- I'lght, entitled sentation. (a) to a lien on, or right of retention of, the surplus of the partnership assets, after satisfying the partnership liabilities, for any sum of money paid by him for the purchase of a share in the partnership and for any capital contributed by him, and is (b) to stand in the place of the creditors of the firm for all 700 CH. 39.] PARTNERSHIP ACT, 1890. [53 & 54 VICT. Eight of out- going partner in certain cases to share profits made after dissolution. Retiring or deceased partner's share to be a debt. Rule for dis- tribution of assets on final settlement of accounts. payments made by him in respect of the partnership liabilities, and (c) to be indemnified by the person guilty of the fraud or making the representation against all the debts and liabilities of the firm. 42. (1) Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with its capital or assets without any final settlement of accounts as between the firm and the out- going partner or his estate, then, in the absence of any agreement to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since the dissolution as the Court may find to be attributable to the use of his share of the partnership assets, or to interest at the rate of five per cent, per annum on the amount of his share of the partnership assets. (2) Provided that where by the partnership contract an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or other share of profits ; but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section. 43. Subject to any agreement between the partners, the amount due from surviving or continuing partners to an out- going partner or the representatives of a deceased partner in respect of the outgoing or deceased partner's share is a debt accruing at the date of the dissolution or death. 44. In settling accounts between the partners after a dissolu- tion of partnership, the following rules shall, subject to any agree- ment, be observed : (a) Losses, including losses and deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the pro- portion in which they were entitled to share profits. (b) The assets of the firm including the sums, if any, contri- buted by the partners to make up losses or deficiencies of capital, shall be applied in the following manner and order : 1. In paying the debts and liabilities of the firm to persons who are not partners therein : 53 & 54 VICT.] PARTNERSHIP ACT, 1890. [CH. 39. 701 2. In paying to each partner rateably what is due from the firm to him for advances as distinguished from capital : 3. In paying to each partner rateably what is due from the firm to him in respect of capital : 4. The ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible. Supplemental. 45. In this Act, unless the contrary intention appears, The expression " Court " includes every Court and judge having jurisdiction in the case : The expression " business " includes every trade, occupation, or profession. 46. The rules of equity and of common law applicable to partnership shall continue in force except so far as they are inconsistent with the express provisions of this Act. 47. (1) In the application of this Act to Scotland the bank- ruptcy of a firm or of an individual shall mean sequestration under the Bankruptcy (Scotland) Acts, and also in the case of an individual the issue against him of a decree of cessio bonorum. (2) Nothing in this Act shall alter the rules of the law of Scotland relating to the bankruptcy of a firm or of the individual partners thereof. 48. The Acts mentioned in the schedule to this Act are hereby repealed to the extent mentioned in the third column of that schedule. 49. This Act shall come into operation on the first day of January one thousand eight hundred and ninety-one. 50. This Act may be cited as the Partnership Act, 1890. Definitions of " Court " and " business." Saving for rules of equity and common law. Provision as to bank- ruptcy in Scotland. SCHEDULE. ENACTMENTS REPEALED. .Repeal. Commence- ment of Act. Short title. Section 48. Session and Chapter. Title or Short Title. Extent of Kepeal. 19 & 20 Viet. c. 60. 19 & 20 Viet, c. 97. 28 & 29 Viet. c. 86. The Mercantile Law Amendment (Scotland) Act, 1856. The Mercantile Law Amendment Act, 1856. An Act to amend the law of partnership. Section seven. Section four. The whole Act. INDEX. ACCEPTANCE, apparent, 48 by acting on offer, 47 by performance of conditions, 45 cannot be assumed, 45 r communication of, 48 condition precedent to, 39 conditional, 40 44 letter of, misdirection of, 32 must be absolute, 40 and within reasonable time, 39 must be directed to or intended for proposer, 68 of proposal, 12, 24, 26 of tender, contract by, 35 presumption of, 45 revocation of, 32, 33 sqq. revocation arriving before, 32 transmission of by post, 30, 31 ACCOUNTS, agent's, 557 partnership, 642, 658 ACQUIESCENCE, as bar to relief on ground of undue influence, 87 And see HOLDING OUT. ACT OF STATE, ratification of, ousts jurisdiction of courts, 540 ACTION cannot be brought upon mutual dealings by and against firms with common partner, 658 ADMINISTRATION BOND, liability of sureties under, not dependent on validity of grant, 446 not void though grant obtained by fraud, 107 ADOPTION, agreement to give allowance in consideration of, 123 under coercion, void, 73 ADVERTISEMENT, contract by, 47 for tenders, effect of, 47 AGENT. See PRINCIPAL AND AGENT. AGREEMENT, alteration of, unauthorized, 265 sqq. ambiguous ; avoidance for uncertainty, 64, 177 collateral to wagering contract, 155 704 INDEX. AGREEM ENT continued. consideration for, unlawful, 112, 127, 145 contingent on impossible events, void, 201 defined, 11 distinguished from contract, 26 fraudulent, 116 independent promises to perform lawful and unlawful acts, 257 in restraint of legal proceedings, 172 177 in restraint of marriage, 162 in restraint of trade, 163 170 public policy, against, 116, 117, 127 tending to create monopoly, 143 to assign or sublet excise licence, 118 distinguished from agreement to sublet public contract, 119 to do impossible act, 252 void, 11, 112, 121, 177,257 advantage received under must be restored, 278 contingent on impossible events, 201 distinguished from illegal, 121 made abroad, not enforceable, though valid by lex loci, 170 where consideration in part unlawful, 145 when a contract, 51 AMBIGUITY, agreements void for, 177 ANNUITY, receipt of out of profits, does not constitute partnership, 622 APPROPRIATION of goods to contract, 361368 APPROPRIATION OF PAYMENT, application at discretion of creditor where no direction from debtor, 259 appropriation as between principal and interest, 260 instructions of debtor must be observed, 258 ARBITRATION, conditions for reference to. not prohibited as being in restraint of legal proceedings, 172, 176 partner cannot bind firm by submission to, 635 remedies for breach of agreement to refer, 177 ARCHITECT, plans prepared by, pass on payment of remuneration provided under contract, 346 ASSIGNMENT, equitable, of future property, 373 of bill of lading, 401 of contract, 205 with intent to defeat creditors, 125 ATTORNEY. See SOLICITOR. AUCTION, auctioneer, agent of vendor, 34 authority to sell without reserve, 437 to sign contract on behalf of both buyer and seller, 528 but he cannot delegate his authority, 533 to take bill of exchange for deposit, 524, 528, 529 buyer's remedy where seller sets up restriction on authority, 437 cannot rescind contract of sale, 529 or warrant goods sold, 529 no implied authority to sell by private contract, 529 INDEX. 705 AUCTION continued. bid, acceptance of, kvtdha-pueoa, 35 withdrawal of bid, 34 effect of advertising sale as without reserve, 46 employment of puffer, 437 goods of third party in hands of auctioneer privileged from distress, 608 sale of goods by ; effect of knocking down lot, 437 statements by auctioneer in sales by Court, reliance on, Add. BAILMENT, agent for payment is not a bailee, 484 a technical term of the common law, 483 and sale, overlapping of, 347 care required by bailee, standard of, 487, 492, 493 carrier, common law liability of, whether affected by Contract Act, 488 common law rule as to, 484, 486, 509 definition of, 482, 484, 488 delivery to bailee, 485 deposit of money with banker is not, 485 distinguished from sale or exchange, 484 duty to disclose faults in goods bailed, 485 estoppel of bailee, 500 expenses of gratuitous bailee, liability of bailor for, 497 finder of goods, right to reward, 502 goods held by seller as bailee, 378 380 gratuitous, standard of care required by, 487 gratuitous, terminated by death of bailor or bailee, 499 gratuitous lender, not liable for secret defects in thing lent, 486 guest at inn, position of, analogous to bailee, 491 liability of bailee for negligence of servants, 492 liability of bailor for latent defects, 486 lien, particular, of bailee, 503 general, of bankers, 504 of factors, 504, 506 of solicitors, 508 of wharfingers, 504, 507 overlapping with sale, 347 profit from goods bailed, right of bailor to, in absence of special agreement, 499 return of goods bailed, 498 no bailment unless goods to be returned or accounted for, 484 return to bailor without title, 500 return to one joint owner, 500 .Roman law. rule of, as to duty of bailor. 486 termination of by wrongful use of goods by bailee, 493 by death, 499 third parties, rights of, 501 warehouse rent, payment of by buyer does not of itself constitute bailment, 379 wrongdoer, suit against for injury to goods bailed, 516 apportionment of relief obtained, 517 BANKER, general lien of, on customer's securities, 504 does not extend to securities deposited for safe custody, 505 i.e. 45 706 INDEX. BANK NOTE, alteration of number, material, 2G6 n. BANKRUPTCY, administration of partnership assets in, 652 insolvency of buyer, effect on sale of goods, 387 390 of promisor does not amount to refusal to perform contract, 223 principal's discharge in, does not discharge surety, 459 BARRISTER, authority to compromise suit, 526, 527 compromise arranged through mistake of, 106 BILL OF EXCHANGE, alteration of, material, effect of, 267, 271 aiithority of partner in trading firm to draw in usual course of business, 635 consideration presumed, 154 indorser, discharge of, where remedy against prior party impaired, 469 notice of dishonour, what is reasonable time for, 238 presentment for acceptance or payment, what is reasonable time for, 238 signature by agent, 493 signature of blank paper, implied authority to holder, 67 And see NEGOTIABLE INSTRUMENT ; PROMISSORY NOTE. BILL OF LADING, assignment of ; effect on transitus, 401 provisions of Bill of Lading Act as to assignment, 402 pledge of, 402 to order of seller, effect of on property in goods, 364 BOND, alteration of, after execution, 267 BREACH OF CONTRACT, "anticipatory breach," 221 223 contract for purchase of land, 316 measure of damages for, 302, 318 wrongful refusal to accept goods, 434 BROKER, authority of, 527 cannot recover commission in respect of wagering agreement, 188 And see PRINCIPAL AND AGENT. CAPACITY, to contract, 53 sqq. follows law of domicil at time contract made, 10 And see. DRUNKENNESS ; LUNATIC ; MARRIED WOMAN ; MINOR/ CARRIER, by railway, liability of for loss of goods subject to provisions of Act, 490 carriage of passenger, notice of special conditions on ticket, 27 common law liability of a " usage of trade," 8 whether affected by Contract Act, 488 delivery of goods to, effect of, 380 negligence of, burden of proof, 488, 491 " CATCHING BARGAINS," rules of equity as to, 84 INDEX. 707 CHAMPERTY, agreement by solicitor with client, making remuneration dependent on result of case, void, 138 agreement to supply funds to carry on suit in consideration of share of property not void for, 134 to avoid agreement, it must be against public policy, 134 case law on the subject, 133 138 English rules against do not apply to India, 133, 134, 137 purchase of subject-matter of suit, not unlawful, 133 sale at undervalue of property already given to another is not champertous, 135 CHARTERPARTY, misrepresentation in as to tonnage of ship, 97 rectification of on ground of mistake, 108 CHEQUE, auctioneer may take in payment of deposit, 529 obliteration of crossing; protection of persons paying in good faith, 271 payment by, at request of creditor, 241 COERCION, adoption under, void, 73 agreement entered into under fear of criminal proceedings, 72 consent excluded by, 70, 98 denned, 71 fear, act done under influence of, 79 inadequate consideration as evidence of, 83, 148, 161 marriage void for, in England, 70 payment under, 299 an involuntary payment, 300 when an offence, 72 COHABITATION, past, as consideration, 128, 157 COMMANDITE, partnership in, 621 COMMON LAW, agency, consideration not necessary to create, 520 agreements in restraint of legal proceedings, 174 auction, employment of puffer, 437 bailees, general liability of, 487 bailment, as to, 484, 486 champerty and maintenance, 132, 133 common carrier, common law liability of, 8, 488 compensation for non-gratuitous act, 294 compounding felony, agreements' for void at, 130 consideration as to, 25, 128 adequacy of, 161 contracts prohibited by, 116, 117 delivery and acceptance of goods, 238, 382 duress in, 72 estoppel of bailee from denying bailor's title, 500 finder of goods, position of, 502 foreign law. proof of, 110 formal contracts in, 149 n., 154 n. 452 708 INDEX. COMMON LAW continued. impossibility of performance by destruction of subject-matter of contract, 284 innkeeper, common law liability of, 491 interest not payable except by express agreement or trade usage, 320 introduction of into India, 2 liability of bailor for latent defects, 486 marriage brocage contracts void by, 138 minor partner, position of, G27 minors' contracts at, 53, 54, 57, 58 misrepresentation, 92 mistake of law, relief for, 109 mistake, recovery back of money paid under, 299 moral predominance of in foreign jurisdiction, 5 n. mutual discharge of obligation on contract, 272 offer and acceptance, as to, 31 past cohabitation, no consideration in, 128, 157 supposed exceptions to rule, 157 payment, place of, 239 place for pei formance of contract, 239, 240 pleading, rules of, 245, 278 pledge of goods, 509 promise by married man to marry another on his wife's death, void, 127 promise not necessarily communicated in, 12 public office, sale of, void by, 142 public policy, as to, 129 relations to native law of contract, 3 restraint of trade, agreements in, common law presumption as to, 167 provisions of I.C.A. as to, in advance of, 167 sale of goods, contracts for, 348 delivery orders on sales of goods, 418 stoppage in transit ; how right affected by assignment of bill of lading, 401 third party cannot sue on contract by, 17 time for performance of contract, 238 trade names, use of, 618 trespass to goods, action by bailor for, 517 undue influence in, 75 xqq. warranty of title on sale of goods, 420, 421 COMMUNICATION, intention to communicate not equivalent to, 27 of acceptance, 48 of proposal, 26 gqq. of special conditions, 27 when complete, 29 COMPANIES, not within partnership clauses of Act, 661 COMPANY', directors, innocent misrepresentation as to authority to draw bills, 96, 101 102 error as to identity of, 69 not bound by false certificate of shares issued by secretary, 606 prospectus, incorporation of, in life policy, 29 COMPENSATION, for misdescription on sales of land, 100 And see DAMAGES. INDEX. 709 COMPROMISE, mistake of counsel, 106 of 'claim, 23, 150 of criminal proceedings, 130, 131 of suit ; agreement under mistake as to subject-matter, 106 implied authority of counsel or solicitor to effect, 526, 527 of suit impeaching will, 125 offence against foreign law, 130, 131 CONCEALMENT, guarantee obtained by, invalid, 474 what is a " material circumstance," 476 of fact, when material, 103 evidence of materiality of, 103 CONDITION, acceptance, conditional, 40, 41 against subletting of contract, breacli of, 118, 119 concurrent, 242 conditions precedent, 197199, 242, 243 distinguished from warranty, 41 9 may include warranty, 420 special, communication of, 27 indorsement of, on tickets, 27, 28 "CONDITION PRECEDENT" to acceptance, 39 CONFLICT OF LAWS, agreement in restraint of trade made abroad, valid by lex loci, not enforceable in India, 170, 171 domicil, capacity to contract governed by law of, 10, 54 CONSENT, ambiguity in expression of. 64 and estoppel, 67 apparent, given under mistake, 65 coercion excludes, 70, 98 definition of, 62, 70 free, what is, 70 obtained by fraud, 70, 71, 98 CONSIDERATION, absence of, generally avoids agreement, 148 sqq. act must be at desire of promisor, 14 adequacy of, 83, 148, 161 agreement to extend time for performance, consideration not necessary for. 274 apparent benefit to promisor not material, 161, 442 apparent forbearance, 23 barred judgment debt, promise to pay does not require consideration, 160 common law of, 25, 128 compromise of claim as, 23, 150 defined, 11, 14 duty, legal, performance of, 127, 151, 152 executed, 24, 26 failure of by default of plaintiff, 250 forbearance to sue as, 22 25, 150, 151 forbidden by law, 112, 114 710 INDEX. CONSIDERATION continued. good, 25 gratuitous promises, 149 guarantee, for, 442 illegal, 112, 122, 255 INDEMNITY, against damages recovered and costs of suit, 439, 440 agent's right to in respect of principal's business, 573 575 limits of the right, 573 contract of, defined, 438 co-sureties entitled to share in benefit of, 481 extent of promisee's rights, 439 rights of promisor not provided for, 441 of surety implied, 478 right to, where money paid by person interested on behalf of another, 286 And see PRINCIPAL AND SURETY. INFANT. See MINOR. 718 INDEX. INNKEEPER, guest, position of analogous to that of bailee, 491 liability of, for loss of guest's goods, 491 lien of, on guest's goods, 504 n. INSANITY. See LUNATIC. INSOLVENCY of buyer, effect on sale of goods, 387 390 of promisor, does not amount to refusal to perform contract. 223 And gee BANKRUPTCY. "INSTRUMENT OF TITLE," what is, 404, 405 INSURANCE, payment of policy, where dependent on proof of claim, 197 policies, without interest, are wagering contracts, 193 policy, incorporation of prospectus in, 2Lt INTENTION, unlawful, not presumed, 115, 129 INTEREST, compound, when by way of penalty, 331 damages, when payable as, 7, 318 damdupat, rule of, as to limit of interest recoverable, 6 increased, stipulations for. whether by way of penalty, 326 .<3 void, where forbidden by statute, 122 LANDLORD AND TENANT. See LEASE. LAW, mistake of, 108, 111 LEASE, avoidance of, for mistake of fact, 10G where property destroyed by unavoidable cause, 25(5 breach of covenant to repair, measure of damages for, 318 granted to partner in his own name, whether firm liable on covenants in, 686 misconstruction of, payment under, not recoverable, 300 rent, tender of, 215 payment to lessor's widow in error, recovery of, 299 . LETTER of acceptance, misdirection of, 32 of credit, constitutes contract when accepted, 46 proposal or acceptance by, 30 33 LICENCE, EXCISE, agreement to assign or sublet, 118, 119 LIEN, general, distinguished from particular lien, 504 general, of attorneys, 501, 508 of bankers, 504 of factors, 504, 506 of policy brokers, 504 of solicitors, 504, 508 of wharfingers, 504, 507 of agent, 570 of bailee, 503 of finder of goods, 502 of pawnee, 510 extent of right, 510, 511 seller's, on sale of goods, 385 gyt/. against subsequent buyer, 390 depends on actual possession. 386 insolvency of buyer, effect of, 387 not defeated by giving of delivery order, 418 revives on dishonour of bills given for price, 387 where goods sold on credit, 387 LIMITATION, account stated does not amount to promise, 159 "acknowledgment" distinguished from " promise," 158 agreement providing for enforcement of rights within stated period, 175 interest, payment of, by debtor, whether keeping alive action against surety, 446 of claim of deceased partner's estate against surviving partners, 656 of suit for dissolution of partnership, 660 of suit for restitution under s. 65... 283 proceedings in respect of loan or of goods pledged, 512 promise to pay barred debt, 148, 158 what amounts to, signature by agent, 159 720 INDEX. LOAN, for gaming or to pay gambling debt, recoverable, 194 of chattel. See BAILMENT. of money to firm. See PARTNERSHIP. oppressive, relief against, 104 LOTTERY, participation in, a criminal offence, 195 what is, 195 LUNATIC, contract of, 59, 61 burden of proof lies on person affirming contract, 61 drunkenness equivalent to insanity, 61 but burden of proof is shifted to person setting up disability, 61 insanity of proposer, effect of, 40 lucid interval, contract in, 61 sound mind, what is, 61 MAHOMEDAN LAW, marriage, agreements in restraint of, 163 marriage contracts contrary to, 124 MAINTENANCE, common law of, not applicable to India, 2 ., 133 And see CHAMPERTY. MAJORITY, age of, 54, 59 MARRIAGE, agreements in restraint of, 162 Asura, 139141 Brahma, 139 . contract to procure, for reward, in England, 138 in India, 139142 effect of, on property of wife, 59, 60 promise, breach of, does not survive against executors, 204 promise by married man to marry another on his wife's death, void, 127 ' but suit maintainable by promisee without notice that promisor is already married, 127 n. what amounts to, 222 void for fraud and coercion in England, 70 MARRIED WOMAN, cannot generally bind husband without his authority, 59 contract, capacity to, not affected by marriage, 59 implied authority to pledge husband's credit, 521 523 Married Women's Property Act, 60 separate estate, 59, 60 contract, liability for, 59, 60 may sue and be sued alone in respect of, 60 wages and earnings are, 60 suit by or against, in respect of separate property, 60 INDEX. 721 MASTER AND SERVANT, contract of service, anticipatory breach of, 222 remuneration of servant by share of profits, 617, 622 wrongful dismissal of servant, restrains servant from carrying on similar business after termination of service, 218 MERCANTILE USAGE, 7 */?., 51 MINOR, act done for benefit of, under s. 70, whether including minor, 297 cannot both repudiate agreement and retain advantage acquired under it, 276 contract of, at common law, 53, 54, 57 cannot be specifically enforced, 58 nor ratified, 56 capacity to, governed by law of clomicil, 54 void, 55, 56, 276 fraudulent representation by, 58, 59 majority, age of, 54, 59 mortgage by, void, 56 mortgage of infant's property, 122 necessaries, liability for, 54, 57, 285, 286 cost of, recoverable from minor's estate, 286 costs incurred in defending suit are, 286 loan to save property from sale under decree is, 286 money advanced for, probably recoverable in England, 57 what are, 57 partner, share of, liable for obligations of firm, 627 personally liable for antecedent debts unless he disclaims on attaining majority, 628 Hindu minor not personally liable where ancestral trade carried on by guardian, 627, 628 promise on attaining majority to repay money borrowed during minority bad for want of consideration, 157 promissory note, given after majority for debt incurred during minority, void, 56 MIS DESCRIPTION, compensation for, on sales of land, 100 MISREPRESENTATION, as to tonnage of ship ; avoidance of charterparty for, 97 by agent, in course of business, binds principal, 604 compensation for misdescription, 100 consent obtained by, 98 definition of, 91 guarantee obtained by, invalid, 474 in English law, 92 innocent, by directors of company, 96 innocent, effect of, 92 means of discovering truth of statement, 98, 100, 101 "positive assertion," meaning of, 95 relation of, to fraud, 89 signature obtained by, 66, 67 MISTAKE, agent's right to sue for money paid by on principal's behalf, 588 apparent consent given under, 65 i.e. 46 722 INDEX. MISTAKE contintted. as to existing fact, 106 compromise of suit brought about under, 106 contract only avoided where mistake relates to essential fact, 106 fundamental error as to nature of transaction, 65 67, 109 person of other party, 68 subject-matter of contract, 6!) in formation of contract, 62, 63 lease, avoidance of, for, 106 erroneous payment of rent under, to lessor's widow, recovery of, 299 n. of counsel, 106 of fact, 105108,111,247 of law, 108111, 248 does not generally invalidate contract, 109 except in cases of fundamental error, 109 order of Court may be set aside for, 107 payment by, liability of payee, 299 recovery of money paid under, 278, 279, 299 rectification of instruments on ground of, 108 specific performance, right to resist on ground of, 108 word does not denote any general legal principle, 64 MONEY-LENDEK, concealment of identity by, 103 MONEY PAID, recovery of. See PAYMENT. MONOPOLY, agreement tending to create, void, 143, 144 MORALITY, agreements contrary to, void, 116, 117, 126 MORTGAGE by minor, void, 56 but Court may allow transaction where money obtained by fraud, 59 fraudulent alteration of mortgage after execution, effect of, 2(58, 269 of minor's property, by administrator, 122 of partnership property, by partner, when binding on firm, 636 redemption, loss of right of. 110 release by one of two joint mortgagees discharges mortgagor, 234 MORTMAIN, STATUTE OF, not applicable to India, 2 n. MUFASSAL, law administered in the, 5 MUTUAL PROMISES, 23 NAME assumed, fraudulent use of by money-lender, 103 firm-name, 618, 654 joint Hindu family name, use of in trading business, 619 right to use after dissolution, 655 no monopoly in, 618 no positive right of person to use his own name for all purposes, 618 but Court will not restrain use of name merely because it resembles that of a trade rival, 618 NATIVE LAW of contract, 2 sqq. how far still in force , 6 INDEX. 723 NECESSARIES, liability of infant for, 54, 57, 285, 286 money advanced for, probably recoverable in England, 57 supplied to wife, liability of husband for, 521 523 what are, 57 And see MINOU. NEGLIGENCE gross, agent liable to principal for, 557 agent guilty of forfeits right to remuneration, 569 what is gross negligence, 557 of carrier, burden of proof, 488, 491 of innkeeper, 491 of principal, injury to agent caused by, 577 of servant, bailee's liability for, 492 NEGOTIABLE INSTRUMENT, alteration of, material, if unauthorized, avoids instrument, 267, 271 consideration for presumed, 154 indorser, discharge of where remedy against prior party impaired, 469 liability of person signing stamped paper in blank, 67 payment by, at request of creditor, 241 promissory note, definition of, 179 n. signature by agent, 591 signature of blank stamped paper, implied authority to holder, 67 time for presentment for acceptance or payment, 238 And see BILL OF EXCHANGE ; PROMISSORY NOTE. NEW YORK, DRAFT CIVIL CODE OF, 62, 92, 162, 164, 178, 503 NOTICE, of dissolution of partnership, 656 of excess of authority by agent, 603 of revocation of agent's authority, 550 of revocation of continuing guarantee, 447, 449 of revocation of proposal, 37 of special conditions on tickets, etc., 27 to agent is notice to principal, 580 . 51 VENDOR AND PURCHASER. See IMMOVABLE PROPERTY. VOID AGREEMENT. See AGREEMENT. VOIDABLE CONTRACT. 11, 85 sqq. rescission of, 275, 284 WAGER, a contingent agreement, 196 bet is a, 181 broker's commission on wagering agreements not recoverable, 188 collateral agreements, when valid, 186 contract in respect of void but not unlawful, 186 n. denned, 180 deposit paid in respect of, not recoverable, 188 differences, cases on gambling in, 183 186 evidence, oral, to prove wagering, nature of agreement admissible, 190 193 life policy is not within prohibited agreements, 181 lotteries, 195 presumption in cases of speculative contracts, 184, 191, 192 promissory note for debt due on wager, action not maintainable on, 194 recovery of money deposited under wagering agreement, 279 of money lent for gaming purposes, 194 speculation distinguished from, 189 Stock Exchange transaction : contract lawful if delivery of stock con- templated, 182, 185 WAIVER of illegality, agreements for void, 144 WARRANTY, breach of, buyer's right on, 106 107, 430 in respect of specific goods, 430 unascertained goods, 431 measure of damages on, 308, 309, 432 distinguished from condition, 419, 420 implied, by custom of trade, 421 in respect of trade marks and trade description, 422 of description, 425 of fitness, 426 no warranty implied on sale of specific chattel, 428 of bulk, on sale by sample, 423 of quality, 421, 423 trade usage as to, 421, 422 INDEX. 743 WARRANTY continued. implied continued. of soundness, on sale of provisions, 422 of title, 419, 421 on sale by sample, 423 latent defect, warranty against not implied, 429, 430 meaning of the word, 419 rejection of goods as not equal to sample, buyer's du'y on, 433 WHA11FINGER, lien of, for balance of account, 504, 507 delivery of goods to, effect of, 380 WITNESS, promise, after subpoena, to pay for loss of time, without considera- tion and void, 152 WORDS, acknowledgment, 158 agent, 517 agreement, 11 bailee, 482 bailment, 482 bailor, 482 by way of wager, 181 coercion, 71 condition, 419 consent, 62, 414 contract, 11, 174 contract of guarantee, 441 contract of indemnity, 438 contingent contract, 195 continuing guarantee, 44(! creditor, 441 debt, 159 does, 297 engagement, 237 firm, 612 fraud, 88 fraudulent, 125 free consent, 70 future transactions, 448 good consideration, 25 good faith, 417 goods, 342 gratuitously, 298 immoral, 126 instrument of title, 404 keeping silence, 476 lawfully, 296 material circumstance, 476 mercantile agent, 412 misrepresentation., 91 movable property, 343 near relation, 148, 154 offence, 417 ordinary diligence, 101 744 INDEX. WORDS continued. partnership, 612 pawnee, .">nit pawnor, .~)ti!i person, 276 pledge, 509 possession, 415 principal, 517 principal debtor, 441 profits, 614 promise, 11 12, 158 promisee, 11 promisor, 11 proposal, 11, 12 reasonable compensation, 338 reasonable opportunity, 213 reasonable time, 237 reciprocal promises, 11, 24 sale, 344 sound, 423 sub-agent, 534 surety, 441 undue influence, 74 warranty. 419, 433 WORK AND LABOUR; contract for, distinguished from conduct for sale, 345 no remuneration for, unless work completed, 279 plans, property in passes on payment of remuneration provided under contract, 346 WRONGS, injury to goods bailed, right to sue for, 516 liability by holding out does not apply to, 626 to third party, liability of firm for, 631 BKADBUKY, AGSEW, & CO. LD., PRINTERS, LONDON" AND TOKBU1DCE. I - f UC SOUTHERN REGIONAL LIBRARY FACILITY