INTRODUCTION
The appellant, Karsandas H. Thacker, sued the respondent, The Saran Engineering Co. Ltd., for a sum of Rs. 20,700 for the damages of the breach of the contract between the two parties. The appellant alleged that he entered into a contract with the respondent for delivering the supply of 200 tons of scrap iron in July 1952 but the respondent expressed his inability and did not deliver the supply on time through a letter. Hence, the case focuses upon the issue, of whether a party is secured from paying the damages after breaching the contract if the other party hasn’t informed the further compliance of the material to the party.
FACTS OF THE CASE
1. In July 1952, the appellant and respondent entered into a contract for a supply of 200 tons of scrap through correspondence. Karsandas, the appellant, then entered into a contract with M/s. Export Corporation for supplying them with 200 tons of scrap, but the respondent wasn’t able to supply the stated amount of scrap and hence, expressed his inability through a letter on 30 January 1953.
2. The appellant then sued the other party for a sum of Rs. 20,700 calculated by the sum of the difference of the sum of the amount the party had to pay what they would have paid to the appellant in pursuance of the contract as interpreted according to Section 73 of the Indian Contract Act, 1872 (The Act in short).
3. The respondent denied paying the claimed damages to the appellant party on grounds inter alia that there had been no complete contract between the parties and that the party didn’t suffer any damages as the rate of scarp in July 1952 was the same on 30 January 1953. Since the deal made was on the principal amount of the preceding deal, the appellant faced no monetary damages. Moreover, the respondent was not informed about this export of the supply of the scrap.
4. The Trial Court after examining the facts of the case, ruled that there had been a completed contract between the parties on October 1952; the respondent wasn’t responsible for the breach of the contract as it was the mistake of the appellant that he didn’t informed the respondent about the export of scrap. Also when there weren’t any losses suffered by the appellant, there was no requirement for this suit and hence, the court dismissed the appeal.
5. The High Court granted the necessary certificate under Article 133(1)(a) of the Constitution and hence, the case sought its way to the Supreme Court of India.
ISSUES
1. Whether the damages must be paid according to Section 73 and/or Section 74 of the Indian Contract Act, 1872 ?
Contentions of Appellant
1. The appellant council argued that the contract between the parties was completed and the respondent breached the contract by not supplying the goods.
2. The council claimed the damages of Rs.20,700 as the amount to be paid by the respondent as compensation for the losses suffered by the appellant by not getting the huge order of 200 tons of scrap iron.
CONTENTIONS OF RESPONDENT
1. The council of the respondent at first argued that the contract was incomplete on the side of the appellant party as he wasn’t informed about the deal of supplying the scrap with the third party to the respondent party.
2. The council mentioned the Iron and Steel (Scrap Control) Order, 1943 also known as the Scrap Control Order, which mentioned a fixed price for selling the iron scraps and selling the scraps above the market price was prohibited under the order. The supply of scrap to the appellant by the respondent was at the market price of Rs.100 per ton ( Rs.70 for the controlled price and Rs.30 for the balance charge, incidental charge).
3. The contract between the appellant and third party was also on the market price and hence, the contract was a principle-to-principle contract. Since the respondent had no clue of this further export of the supply, they’re not liable to pay any compensation.
JUDGEMENT
The Supreme Court ruled in favor of the respondent and upheld the decision of The High Court. After analyzing the facts, it was clear that the respondent was not wrong at its end. It was the mistake of the appellant that they didn’t inform about the export supply deal to the respondent.
The court referred to Section 73 (k) of The Act, that if a contract is breached by a party then that party is liable to pay the other party, the difference between the contract price of the articles agreed to be sold and the sum paid by the other party for purchasing another article on account of the default of the first party, but the first party has not to pay the compensation which the second party had to pay to third parties as he had not been told at the time of the contract that the second party was making the purchase of the article for delivery to such third parties. But in this case, there were no monetary damages faced by the appellant party.
The respondent sent the letter to the appellant before the expiry of both deals. If the appellant wanted he could’ve supplied the scraps to the third party by purchasing it from the market at the same rate but he didn’t do so and now claiming the damages from the respondent is unreasonable.
The court ruled in favor of the respondent and stated that when a party suffers indirect or remote loss or damages due to a breach of the contract, then the suffering party is not liable to get any compensation. Hence, the appeal failed and it was dismissed with cost.
CONCLUSION
The case relied upon general confusion that had arisen between the parties regarding Section 73 of The Act, which says a person or a party who breaches the contract has to pay the other party a sum of the difference between the contract price of the goods agreed to be sold and the amount paid by the other party for purchasing another good because of the first party’s breach. But if the first party is not informed about the export of material with the third party, then he’s not liable to compensate the damages suffered by the second party. The same happened in this case Karsandas H. Thacker Vs. The Saran Engineering Co. Ltd. judgment was ruled in favor of the respondent (The Saran Engineering Co. Ltd.) as the appeal was dismissed by the apex court.
REFERENCE
This article is written by Ansh Mishra, a student of Maharaja Agrasen Institute of Management Studies (MAIMS), GGSIPU; an intern at Legal Vidhiya.
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