Case: China Cotton Exporters Vs. Beharilal Ramcharan Cottonmills Ltd

By a contract in writing dated August 9, 1950 entered into at Bombay, the appellants who carry on business at Bombay as import and export merchants agreed to sell to the respondent, a company carrying on business also at Bombay as a Cotton Spinning and Weaving Mill, and the respondent agreed to purchase 50,000 lbs. Of Italian Staple Fibre Cotton of the quality mentioned therein, at Rs. 1,350 /- per Candy Ex docks, Shipment October/November, 1950. Of this quantity 10,000 lbs. was delivered to and accepted by the respondent company on October 31, 1950. The balance amount of 40,000 lbs. not having been delivered in terms of the contract the respondent company brought the present suit for damages on the allegation that the appellant firm had wrongfully failed and neglected to deliver this balance amount of the contract goods. The appellant admitted failure to deliver this amount; but pleaded that this was not wrongful failure to deliver. The appellant averred in its written statement that the non-supply of the goods arose by reason of the "intermediary parties (meaning thereby the suppliers) failing to supply and deliver goods to the defendant and also of the circumstances beyond their control"; and claimed that it was exempted from any liability to the plaintiff company under printed term 16 of the contract. The defendant further pleaded that the shipment time mentioned in the contract was not guaranteed, and the time of shipment was not of the essence of the contract. The trial Judge held that the shipment time was guaranteed, except in so far as delay in shipment might be due to delay in obtaining import licence- which however was in the present case obtained in good time -; that time of shipment was of the essence of the contract; and finally that there was no case here of any " intermediary parties" failing to supply or deliver the goods and as the defendant firm had not made any adequate contract which would have enabled it to obtain the supply of goods - if such contract had not been broken - from which it could have delivered these 40,000 lbs, the further defence that the non-supply was due to "circumstances beyond their control" also failed. Accordingly the Trial Judge held that there had been wrongful breach of the contract by the appellant firm and the plaintiff company - the respondent - was entitled to damages. The actual assessment of damages was referred to the Commissioner.2. On appeal by the defendant, the Appeal Court held agreeing with the Trial Judge that as there was no delay in obtaining the import licence, the obligation to deliver to the plaintiff contract goods of October/November shipment continued. The learned judges also pointed out that "the failure to give delivery primarily arose because the defendants never were ready and willing to carry out their obligation to give delivery because they had made no arrangement to get goods from Italy which they could have delivered at the contract time". Therefore, the Court of Appeal held that it was not open to defendant to rely on any of the clauses in the contract which condones delay on their part or which excuses them from giving delivery. The appeal was accordingly dismissed.3. It is against this order of dismissal that the present appeal has been preferred by the defendant firm after having obtained special leave from this Court.

Court's reasoning:
6. We find thus that whatever may have been said earlier in the printed portion of the contract the parties took care, after specifying "October/November, 1950" as the date of shipment to make a definite condition in the remark column, on the important question whether the shipment date was being guaranteed or not and if so, to whatas we must, that in commercial contracts, time is ordinarily of the essence of the contract and giving the word "therefore" its natural, grammatical meaning, we must hold that what the parties intended was that to the extent that delay in shipment stands in the way of keeping to the shipment date October/November, 1950, this shipment date was not guaranteed; but with this exception shipment October/November, 1950, wasdo not consider this explanation of the use of "therefore" acceptable. If the parties intended that quite apart from delay in obtaining import licence, shipment date was not guaranteed, the natural way of expressing such intention - an intention contrary to the usual intention in commercial contracts of treating time as the essence of the contract - would be to say : "This contract is subject to import licence and the shipment date is not guaranteed.As we have already mentioned, the remarks column was filled in manuscript and consequently even if the terms in print by themselves might have justified a conclusion that the parties intended that the shipment date was not guaranteed, the intention expressed in the manuscript should prevail. We are not satisfied however that the terms in print would justify any such conclusion.The provisions of Cls. 7 and 9 do not affect the question.10. We are, therefore, of opinion that the courts below were right in thinking that the shipment time was guaranteed, and time was of the essence of theis not disputed that if there was any such adequate contract the defendant will not be liable for damages. It is equally clear that if there was no such contract, the defendant cannot escapethink that this proposition is not sound. Before the seller could be heard to say that the non-supply was due to default on the part of his suppliers or some other cause beyond his control the seller is bound to show that he himself did all in his power to ensure timely supply. He could do so by showing that he had made a contract under which he was entitled to obtain the supplies in good time. If under his contract with his own suppliers he was not so entitled but there was merely a chance of his getting the supplies in time to enable him to honour his contract the non-supply would clearly be due to his own default in not making a contract which would have so entitled him and not to a default on the part of the supplier or to a circumstance beyond hiswould be force in this argument if at the time the breach took place, that is, the last date under which shipment could be made under the contract in suit, the defendant would have been entitled to obtain goods, under that earlier contract. But that is not the position. In any case the earlier contract was cancelled at the end of September ; so that at the time of the breach the seller was not entitled to receive any goods under that contract.The great difficulty in the way of this argument is that the defendants contract with its Italian suppliers has not been produced and we do not know the terms of that contract.Quite clearly however the question whether delivery should be spread over the period arises only in case of instalment contracts. There is nothing however before us to show that the defendants contract with its Italian suppliers was an instalment contract. Even though the proprietor of the defendants Italian supplier was examined he said nothing which would even tend to show that the contract between him and the defendant was an instalment contract. In the absence of the contract or any other circumstances justifying a conclusion that it was instalment contract it is not possible to accept the contention of the learned Attorney-General that the defendants Italian suppliers would be bound to spread the supply over the period October/November, 1950.20. There is thus no escape from the conclusion that the defendant has failed to establish its case that it had an adequate contract with its Italian suppliers, which if not broken, would put it in possession of 40,000 lbs. of cotton fibre before December 15, 1950.The defendant firm cannot therefore escape the liability for the damages for breach of the contract, by the failure to supply those goods.