Case: M/S. Murlidhar Chiranjilal Vs. M/S. Harishchandra Dwarkadas And Another

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 re-sold 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 re-sell the cargo before delivery and not retain it themselves.11. The second case on which reliance was placed is Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., (1949) 1 All ER 997. 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 S. 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 re-sold before delivery and therefore any loss by the breach of contract eventually may include loss that may have been suffered by the buyers because of the failure to honour the intermediate contract of re-sale 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.12. 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 re-sale; 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 re-sale 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 as it was received in Kanpur 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 anywhere 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.13. We may in this connection refer to the following observations in Chao v. British Traders and Shippers Ltd., 1954-1 All ER 779 at p. 797 which are apposite to the facts of the present case:"It is true that the defendants knew that the plaintiffs were merchants and therefore had bought for re-sale, but everyone who sells to a merchant knows that he has bought for re-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 re-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."14. 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 Calcutta. This is a simple case of purchase of goods for re-sale 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 date 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 S. 73 of the Contract Act apply. This is an 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 S. 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 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 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 duly 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 is neglect to take suchtwo principles also follow from the law as laid down in S. 73 read with the Explanation thereof. If therefore the contract was to be performed at Kanpur it was the respondents 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 re-imbursed 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. But 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 oftwo cases exemplify that provision of S. 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 re-sold before delivery and therefore any loss by the breach of contract eventually may include loss that may have been suffered by the buyers because of the failure to honour the intermediate contract of re-sale 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.Now there is no dispute that the buyer had purchased canvas in this case for re-sale; 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 re-sale 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 as it was received in Kanpur 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 anywhere 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 itthese 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 Calcutta. This is a simple case of purchase of goods for re-sale 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 date 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 S. 73 of the Contract Act apply. This is an 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 S. 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.