Appeal No193 of 1958
Appeal by special leave from the judgment and decree dated October 3 1955 of the High Court of Judicature Madhya Bharat Indore in Civil First Appeal No 58 of 1952
C B Aggarwala and Bhagwan Das Jain for the appellant
Radhey Lal Aggarwal and A G Ratnaparkhi for respondent No 1 1961
March 29
The Judgment of the Court was delivered by WANCHOO J
This is an appeal by special leave from the judgment of the High Court of Madhya Bharat
A suit was filed by firm Messrs Harishchandra Dwarkadas hereinafter called the respondent against the appellant firm Messrs Murlidhar Chiranjilal and one Babulal
The case of the respondent was that a contract had been entered into between the appellant and the respondent through Babulal for sale of certain canvas at Re I per yard
The delivery was to be made through railway receipt for Calcutta f o r Kanpur
The cost of transport from Kanpur to Calcutta and the labour charges in that connection were to be borne by the respondent
It was also agreed that the railway receipt would be delivered on August 5 1947
The appellant however failed to 655 deliver the railway receipt and informed the respondent on August 8 1947 that as booking from Kanpur to Calcutta was closed the contract had become impossible of performance consequently the appellant cancelled the contract and returned the advance that had been received
The respondent did not accept that the contract had become impossible of performance and informed the appellant that it had committed a breach of the contract and was thus liable in damages
After further exchange of notices between the parties the present suit was filed in November 1947
Written statements were filed both by the appellant and Babulal
The contention of Babulal was that the contract had become incapable of performance and was therefore rightly rescinded
Further Babulal contended that he was not in any case liable to pay any damages
The appellant on the other hand denied all knowledge of the contract and did not admit that it was liable to pay any damages
Certain other pleas were raised by the appellant with which we are however not concerned in the present appeal
Three main questions arose for determination on the pleadings of the parties
The first was whether Babulal had acted as agent of the appellant in the matter of this contract the second was whether the contract had become impossible of performance because the booking of goods from Kanpur to Calcutta was stopped and the last was whether the respondent was entitled to damages at the rate claimed by it
The trial court held that Babulal had acted as the agent of the appellant in the matter of the contract and the appellant was therefore bound by it
It further hold that the contract had become impossible of performance
Lastly it hold that it was the respondent s duty when the appellant had failed to perform the contract to buy the goods in Kanpur and the respondent had failed to prove the rate prevalent in Kanpur on the date of the breach namely August 5 1947 and therefore was not entitled to any damages
On this view the suit was dismissed
The respondent went in appeal to the High Court 656 and the two main questions that arose there were about the impossibility of the performance of the contract and the liability of the appellant for damages
The High Court held that the contract had not become impossible of performance as it had not been proved that the booking between Kanpur and Calcutta was closed at the relevant time
It further held that the respondent was entitled to damages on the basis of the rate prevalent in Calcutta on the date of breach and after making certain deductions decreed the suit for Rs 16946
Thereupon there was an application by the appellant for a certificate to appeal to this Court which was rejected
This was followed by an application to this Court for special leave which was granted and that is how the matter has come up before us
The same two questions which were in dispute before the High Court have been raised before us on behalf of the appellant
We think it unnecessary to decide whether the contract had become impossible of performance as we have come to the conclusion that the appeal must succeed on the other point raised on behalf of the appellant
The necessary facts in that connection are these The contract was to be performed by delivery of railway receipt f o r Kanpur by the appellant to the respondent on August 5 1947
This was not done and therefore there was undoubtedly a breach of the contract on that date
The question therefore that arises is whether the respondent has proved the damages which it claims to be entitled to for the breach
The respondent s evidence on this point was that it proved the rate of coloured canvas in Calcutta on or about the date of the breach
This rate was Rs 1 8 3 per yard and the respondent claimed that it was therefore entitled to damages at the rate of Re 0 8 3 per yard as the contract rate settled between the parties was Rs 1 per yard The quantum of damages in a case of this kind has to be determined under section 73 of the Contract Act No IX of 1872
The relevant part of it is as follows 657 When a contract has been broken the party who suffers by such breach is entitled to receive from the party who has broken the 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  Explanation In estimating the loss or damage arising from a breach of contract the means which existed of remedying the inconvenience caused by the non performance of the contract must be taken into account
 The contention on behalf of the appellant is that the contract was for delivery f o r Kanpur and the respondent had therefore to prove the rate of plain not coloured canvas at Kanpur on or about the date of breach to be entitled to any damages at all
The respondent admittedly has not proved the rate of such canvas prevalent in Kanpur on or about the date of breach and therefore it was not entitled to any damages at all for there is no measure for arriving at the quantum of damages on the record in this case
Where goods are available in the market it is the difference between the market price on the date of the breach and the contract price which is the measure of damages
The appellant therefore contends that as it is not the case of the respondent that similar canvas was not available in the market at Kanpur on or about the late of breach it was the duty of the respondent to buy the canvas in Kanpur and rail it for Calcutta and if it suffered any damage because of the rise in price over the contract price on that account it would be entitled to such damages
But it has failed to prove the rate of similar canvas in Kanpur on the relevant date
There is thus no way in which it can be found that the respondent suffered any damage by the breach of this contract
The two principles on which damages in such cases are calculated are well settled
The first is that as far as possible he who has proved a breach of a bargain 
83 658 to supply what he contracted to get is to be placed as far as money can do it in as good a situation as if the contract had been performed but this principle is qualified by a second which imposes on a plaintiff the duty of taking all reasonable step to mitigate the loss consequent on the breach and debars him from claiming any part of the damage which is due to his neglect to take such steps British Westinghouse Electric and Manufacturing Company Limited vs Underground Electric Railways Company of London 1
These two principles also follow from the law as laid down in section 73 read with the Explanation thereof If therefore the contract was to be performed at Kanpur it was the respondent s duty to buy the goods in Kanpur and rail them to Calcutta on the date of the breach and if it suffered any damage thereby because of the rise in price on the date of the breach as compared to the contract price it would be entitled to be reimbursed for the loss
Even if the respondent did not actually buy them in the market at Kanpur on the date of breach it would be entitled to damages on proof of the rate for similar canvas prevalent in Kanpur on the date of breach if that rate was above the contracted rate resulting in loss to it
Bat the respondent did not make any attempt to prove the rate for similar canvas prevalent in Kanpur on the date of breach
Therefore it would obviously be not entitled to any damages at all for on this state of the evidence it could not be said that any damage naturally arose in the usual course of things
But the learned counsel for the respondent relies on that part of section 73 which says that dam ages may be measured by what the parties knew when they made the contract to be likely to result from the breach of it
It is contended that the contract clearly showed that the goods were to be transported to and sold in Calcutta and therefore it was the price in Calcutta which would have to be taken into account in arriving at the measure of damages for the parties knew when they made the contract that the goods were to be sold in Calcutta
Reliance in this connection is placed on 1 689
659 two cases the first of which is Re R and H Hall Ltd and W H Pim Junior  Co s Arbitration 1
In that case it was held that damages recoverable  by the buyers should not be limited merely to the difference between the contract price and the market price on the date of breach but should include both the buyers  own loss of profit on the resale and the damages for which they would be liable for their breach of the contract of resale because such damages must reason ably be supposed to have been in the contemplation of the parties at the time the contract was made since the contract itself expressly provided for are sale before delivery and because the parties knew that it was not unlikely that such resale would occur That was a case where the seller sold unspecified cargo of Australian wheat at a fixed price
The contract provided that notice of appropriation to the contract of a specific cargo in a specific ship should be given within a specified time and also contained express provisions as to what should be done in various circumstances if the cargo should be resold one or more times before delivery
That was thus a case of a special type in which both buyers and seller knew at the time the contract was made that there was an even chance that the buyers could resell the cargo before delivery and not retain it themselves
The second case on which reliance was placed is Victoria Laundry Windsor Ltd vs Newman Industries Ltd 2
That was a case of a boiler being sold to a laundry and it was held that damages for loss of profit were recoverable if it was apparent to the defendant as reasonable persons that the delay in delivery was liable to lead to such loss to the plaintiffs
These two cases exemplify that provision of section 73 of the Contract Act which provides that the measure of damages in certain circumstances may be what the parties knew when they made the contract to be likely to result from the breach of it
But they are cases of a special type in one case the parties knew that goods purchased were likely to be resold before delivery and therefore any loss by the breach of contract eventually 1 2 660 may include loss that may have been suffered by the buyers because of the failure to honour the intermediate contract of resale made by them in the other the goods were purchased by the party for his own business for a particular purpose which the sellers were expected to know and if any loss resulted from the delay in the supply the sellers would be liable for that loss also if they had knowledge that such loss was likely to result
The question is whether the present is a case like these two cases at all
It is urged on behalf of the respondent that the seller knew that the goods were to be sent to Calcutta therefore it should be presumed to know that the goods would be sold in Calcutta and any loss of profit to the buyer resulting from the difference between the rate in Calcutta on the date of the breach and the contract rate would be the measure of damages
Now there is no dispute that the buyer had purchased canvas in this case for resale but we cannot infer from the mere fact that the goods were to be booked for Calcutta that the seller knew that the goods were for resale in Calcutta only
As a matter of fact it cannot be denied that it was open to the buyer in this case to sell the railway receipt as soon at it was received in Kanpnr and there can be no inference from the mere fact that the goods were to be sent to Calcutta that they were meant only for sale in Calcutta
It was open to the buyer to sell them any where it liked
Therefore this is not a case where it can be said that the parties knew when they made the contract that the goods were meant for sale in Calcutta alone and thus the difference between the price in Calcutta at the date of the breach and the contract price would be the measure of damages as the likely result from the breach
The contract was for delivery for Kanpur and was an ordinary contract in which it was open to the buyer to sell the goods where it liked
We may in this connection refer to the following observations in Chao and others vs British Traders and Shippers Ltd 1 which are apposite to the facts of the present case 1 797
661 It is true that the defendants knew that the plaintiffs were merchants and therefore had bought for resale but every one who sells to a merchant knows that he has bought for are sale and it does not as I understand it make any difference to the ordinary measure of damages where there is a market
What is contemplated is that the merchant buys for are sale but if the goods are not delivered to him he will go out into the market and buy similar goods and honour his contract in that way
If the market has fallen he has not suffered any damage if the market has risen the measure of damages is the difference in the market price
 In these circumstances this is not a case where it can be said that the parties when they made the contract knew that the likely result of breach would be that the buyer would not be able to make profit in Calcutta
This is a simple case of purchase of goods for resale anywhere and therefore the measure of damages has to be calculated as they would naturally arise in the usual course of things from such breach
That means that the respondent had to prove the market rate at Kanpur on the date of breach for similar goods and that would fix the amount of damages in case that rate had gone above the contract rate on the late of breach
We are therefore of opinion that this is not a case of the special type to which the words which the parties knew when they made the contract to be likely to result from the breach of it appearing in section 73 of the Contract Act apply
This is in ordinary case of contract between traders which is covered by the words which naturally arose in the usual course of things from such breach appearing in section 73
As the respondent had failed to prove the rate for similar canvas in Kanpur on the date of breach it is not entitled to any damages in the circumstances
The appeal is therefore allowed the decree of the High Court set aside and of the trial court restored with costs to the appellant throughout


Summary:
The appellant entered into a contract with the respondent for the sale of certain canvas at Re 1 per yard under which the delivery was to be made through railway receipt for Calcutta for Kanpur
The cost of transport from Kanpur to Calcutta and the labour charges in that connection were to be borne by the respondent and it was agreed that the railway receipt would be delivered on August 5 1947
The appellant was unable to deliver the railway receipt on the due date because booking from Kanpur to Calcutta was closed and therefore cancelled the contract
The respondent instituted a suit for the recovery of damages for the breach of the contract and claimed that as the seller knew that the goods were to be sent to Calcutta and must therefore be presumed to know that the goods would be sold in Calcutta any loss of profit to the buyer resulting from the difference between the rate in Calcutta on the date of the breach and the contract rate would be the measure of damages
Held 1 that it is well settled that the two principles relating to compensation for loss or damage caused by breach of contract as laid down in section 73 Of the  read with the Explanation thereof are i that as far as possible he who has proved a breach of a bargain to supply what he contracted to get is to be placed as far as money can do it in as good a situation as if the contract had been performed but ii that there is a duty on him of taking all reasonable steps to mitigate the loss consequent on the breach and debars him from claiming any part of the damage which is due to his neglect to take such steps
British Westinghouse Electric and Manufacturing Company Limited vs Underground Electric Railway Company of London  relied on
2 that the contract in the present case was for delivery for
Kanpur in which it was open to the buyer to sell the goods where it liked and no inference could be drawn from the mere fact that goods were to be booked for Calcutta that the seller knew that the goods were for resale in Calcutta only
The contract was therefore not of the special type to which the words which the parties knew when they made the contract 654 to be likely to result from the breach of it appearing in section 73 of the  would apply but an ordinary contract for which the measure of damages would be such as naturally arose in the usual course of things from such breach within the meaning of that section
The damages would be the difference between the market price in Kanpur on the date of breach and the contract price
But as the respondent bad failed to prove the rate for similar canvas in Kanpur on the date of breach it was not entitled to any damages as there was no measure for arriving at the quantum
Chao and others vs British Traders and Shippers Ltd  relied on
Re R and H Hall Ltd and WP Pim junior  Co s Arbi tration and Victoria Laundry Winsdsor Ltdv
Newman Industries Ltd  distinguished