Judgement Appeal (No. 116 of 1921) from a judgment and decree of the High Court in its appellate jurisdiction (February 23, 1920) reversing a decree of that Court in its original civil jurisdiction (June 26, 1919), The suit was brought by the appellants in the High Court to recover from the respondents damages for their failure to deliver steam coal under a contract in writing dated October 11, 1917. Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 10 The facts appear from the judgment of the Judicial Committee. The material part of the notice issued by the Coal Controller, Calcutta, on January 30, 1917, was as follows " The Committee appointed by Government to regulate coal supplies direct that wagons will only be supplied after February 5 next on indents signed by the actual consumer and countersigned by the authority appointed by the Committee to certify such indents as under . . . ." A further notice was issued by the Government on December 27, 1917, which stated (inter alia) as follows " 9. Wagons will be supplied on indents submitted by the local colliery manager to the district traffic superintendents in charge of the coal districts, but will be subject to restrictions on account of transport difficulties or other causes, such restrictions may on any occasion lead to the suspension or curtailment of wagon supplies under certain classes of indents." The notice provided an " order of priority" according to the purpose for which indented coal was required, the classification being from A to E ; the indent in the present case came under class E—namely, that to be least favourably treated. The respondents by their written statement alleged that the delivery of further coal beyond the 335 tons delivered became impossible, owing to the Government having commandeered the colliery at Jharia, and having restricted the output at the Nandkurki Colliery; they alleged further that from February to April the supply of wagons for class E coal was stopped. The trial judge (Kajiji J.) held that the contract was not subject to the supply of wagons and that it did not become incapable of performance. He made a decree for Rs. 17,508 damages. On appeal the decree was reversed and the suit was dismissed. The trial judge (Kajiji J.) held that the contract was not subject to the supply of wagons and that it did not become incapable of performance. He made a decree for Rs. 17,508 damages. On appeal the decree was reversed and the suit was dismissed. The learned judges (Macleod C.J. and Heaton J.) were of opinion that owing to the Government control the contract in effect was to deliver coal for supply to the ice factory, and not to be dealt with in the open market. In the absence of evidence that the buyers had suffered damage through the coal not having been delivered to the ice factory, they held that no damages were recoverable. 1923. Feb. 5, 6. Sir John Simon KC, Dunne K.C. and E. B. Raikes for the appellants. The measure of damages provided by s. 73 of the Indian Contract Act is the same in the case of breach of a contract of sale as in England. The appellate Court misinterpreted the effect of the Government regulations in relation to the contract. Although an indent had to be furnished there was no necessary identity between the coal delivered under the contract and the coal indented for. The coal was to be delivered from stock. The position as between the respondents and the ice factory is not material to the damages, nor anything which occurred after the breach. The appellants were entitled to the difference between the market price of the coal at the date of the breach and the contract price Jamal v. Moolla Dawood Sons & Co. (( 1915) L. R. 43 I. A. 6.) ; Muhammad Habib Ullah v. Bird & Co. (( 1921) L. R. 48 I. A. 175.) ; Rodocanachi v. Milburn (( 1886) 18 Q. B. D. 67.) ; Williams Brothers v. Agius ([ 1914] A. C. 510.) ; Wertheim v. Chicoutimi Pulp Co. ([ 1911] A. C. 301, 307.); Benjamin on Sale, 6th ed., p. 1094. Sir George Lowndes K.C. and G. McNair for the respondents. The sellers had notice of the particular purpose for which the goods were to be used—namely, for supply to the ice factory; there was no evidence that they suffered any damage by reason of the coal not being so supplied. Sir George Lowndes K.C. and G. McNair for the respondents. The sellers had notice of the particular purpose for which the goods were to be used—namely, for supply to the ice factory; there was no evidence that they suffered any damage by reason of the coal not being so supplied. The measure of damages was such a sum as would place the plaintiffs in the position which they would have been in had the contract been fulfilled Wertheim v. Chicoutimi Pulp Co. ([ 1911] A. C. 301, 307.) ; British Westinghouse Co. v. Underground Electric Co. ([ 1912] A. C. 673, 689.) ; Watts, Watts & Co. v. Mitsui & Co. ([ 1917] A. C. 227, 241.) The difference in market value is only prima facie the Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 11 measure of damages for failure to deliver, and is not one applicable to this case. Although the measure of damages laid down by s. 73 of the Indian Contract Act does not differ substantially from that in England, it is to be observed that under illustrations (i), (j) and (k) to the section notice of the purpose for which goods are required is sufficient to affect the measure of damages, without acceptance of the risk by the sellers. The effect of the contract, in conjunction with the indent, was that the appellants could only by fraud sell the coal to anybody but the ice factory. Dunne K.C. replied. Feb. 27. The judgment of their Lordships was delivered by LORD ATKINSON. This is an appeal from a decree of the High Court of Bombay in its appellate jurisdiction dated February 23, 1920, reversing a decree of a single judge of the said Court in its original jurisdiction dated June 26, 1919. The suit out of which the appeal arises was instituted by the appellants, as plaintiffs, against the respondents claiming over Rs.40,000 damages for breach of a contract for the sale of steam coal. The suit was decided by the trial judge in the plaintiffs favour. He assessed the damages at Rs. The suit out of which the appeal arises was instituted by the appellants, as plaintiffs, against the respondents claiming over Rs.40,000 damages for breach of a contract for the sale of steam coal. The suit was decided by the trial judge in the plaintiffs favour. He assessed the damages at Rs. 17,508-6-5, but that decree was set aside by a Division Bench of the High Court (Macleod C.J. and Heaton J.), which allowed the appeal and dismissed the suit on the ground that in the special circumstances which existed no damage had been suffered by the plaintiffs. The main question for determination by this Board is whether in these circumstances the appellants are entitled to the sum of Rs. 17,508-6-5 awarded to them by the trial judge or are, as decided by the appellate Court, not entitled to recover any damages. On October 11, 1917, the appellant company and the respondent company entered into an agreement in writing in the following terms— "Keshavlal Brothers & Co., Bombay, "11th October, 1917. "The undersigned have this day sold to Messrs. Keshavlal Brothers & Co. quantity of coal amounting to Rs.---1,200 tons or thereabouts. Description.—Bengal steam coal, good second class. Delivery.—To be despatched to Cotton Depot, coal to be weighed and delivered at Cotton Depot, monthly 200 tons from November, 1917, to April, 1918, in equal instalments. Rate. —Rs.17.15, say Rs. seventeen and annas fifteen, per ton net. Delivery.—At Cotton Depot. Terms.—Payment on delivery in Bombay. Indent in any class to be furnished by the buyers, and the sellers agree and undertake to deliver the coal guaranteed in instalments as above from stock. (Sd.) for Diwanchand & Co." The cotton depot mentioned in this agreement is admittedly a place in Bombay where cotton and other Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 12 goods are deposited for sale. The respondet company had admittedly a depot there for coal. It is to be observed that the coal contracted to be sold is not identified. It is to be taken from the vendors stock. It is necessary to describe at some length the system for the supply of coal established at this date by the Indian Government. The respondet company had admittedly a depot there for coal. It is to be observed that the coal contracted to be sold is not identified. It is to be taken from the vendors stock. It is necessary to describe at some length the system for the supply of coal established at this date by the Indian Government. Owing to the shortage of coal due to the war, committees had been appointed for several districts in India, including Bombay, to regulate the supply of coal, and the means by which it could be obtained. Officials styled Coal Controllers were, by the Government of India, appointed to superintend, direct, and control the action of these com mittees. On January 30, 1917, the Coal Controller, having jurisdiction in the matter, issued a notice to the effect that the committee appointed by Government to regulate coal supplies had directed that wagons would only be supplied after February 5 then next succeeding, on indents signed by the actual consumer and countersigned by the authority appointed by the committee to certify these indents, and further that the indents should be prepared on the prescribed forms, copies of which were obtainable from the coal managers named. These indents were graded for priority into five classes, A, B, C, D, E, not according to the nature of the coal to be supplied, but rather according to the urgency of the need of the different consumers to obtain coal. The respondent company had agreed with the Garraria Colliery at Jharia, Bengal, to buy from them the coal necessary, presumably, to implement the above-mentioned contract of October 11. The whole output from this colliery was placed at the disposal of the Government in December, 1917. The indent was thereupon transferred to the Nand-kurki Colliery. Shortly after, the produce of this latter colliery was restricted, and the indent was transferred to the Fatehpur Colliery. The appellants wrote to the respondents the following letter dated "Bombay, November 8, 1917" " Re our Contract for 1,200 tons of steam coal dated 11.10.17. With reference to our above contract we beg to send you herein enclosed a special indent, No. 719, dated 7.11.17, in favour of the Proprietors, The Dhanjibhoy Ice Factory, Mazagaon, and Bombay. The appellants wrote to the respondents the following letter dated "Bombay, November 8, 1917" " Re our Contract for 1,200 tons of steam coal dated 11.10.17. With reference to our above contract we beg to send you herein enclosed a special indent, No. 719, dated 7.11.17, in favour of the Proprietors, The Dhanjibhoy Ice Factory, Mazagaon, and Bombay. The special indent has been certified by the Deputy Controller, Coal supplies, Bombay, recommending the special supply of 10 (ten wagons) monthly up to 120 wagons for despatch to Byculla (Bombay) on their account. We are forwarding the third part of the indent to the Coal Manager, Calcutta, requesting him to sanction special supply of wagons to Dullabhji Howjees Garraria Colliery and instruct the District Superintendent, Dhanbad, to allot wagons against indents from the Colliery. Kindly forward this second part to the colliery concerned instructing them to indent for the wagons regularly and despatch coal without the least delay. We enclose herewith a copy of the Coal Managers letter. Trusting you to do the needful, and hoping to hear soon from you re despatches." On the same day the appellant company addressed to the coal manager at Calcutta a letter inclosing a third part of the special indent in favour of the ice factory, and requesting the Coal Manager to sanction the supply of wagons as certified and to give instructions that indents from the colliery should be met. The indent referred to in this letter was in the following form— "Keshavlal Brothers and Co., East Indian Railway, Special Indent for Coal. Indent No. 719. Dated November 7, 1917. "(1.) Full name and address of Consumer The Proprietors, Dhanjibhoy Ice Factory, Mazagaon, Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 13 Bombay. (2.) Description of industry ice factory. (3.) Weekly consumption 40 tons (forty). (4.) Stocks held on date, tons 55 tons. (5.) Party from whom purchased Messrs. Bhukhandas Motilal and Co., c/o Dewanchand and Co. (6.) Name of Colliery Garraria Colliery. (7.) Name of managing agents of the Colliery Dhulabhji Howji. (8.) Name of siding coal will be loaded at Garraria E. I. Railway. (9.) Description of coal Steam coal. (10.) Total quantity purchased tons 120 wagons. (11.) Terms of delivery 10 wagons monthly. Bhukhandas Motilal and Co., c/o Dewanchand and Co. (6.) Name of Colliery Garraria Colliery. (7.) Name of managing agents of the Colliery Dhulabhji Howji. (8.) Name of siding coal will be loaded at Garraria E. I. Railway. (9.) Description of coal Steam coal. (10.) Total quantity purchased tons 120 wagons. (11.) Terms of delivery 10 wagons monthly. (12.) Name of railway station at which coal will be unloaded Byculla (Bombay)." The nature and minuteness of the information inquired after in this specimen indent shows how anxious the officers of the Government of India were that the coal to be carried in the wagons they permitted to be used should be applied to satisfy the needs of consumers, and not be trafficked in by middlemen. But the contract which by the use of the requested wagons it was sought to obtain coal to implement was not the contract entered into between the appellants and the respondents on October 11, 1917, nor yet a contract entered into between the appellant company and the Dhanjibhoy Ice Factory. It is apparently a contract entered into between the ice factory and a company named the Bhukhandas Motilal Company. It may well be that the words "c/o Divanchand and Co.," found in the indent after the name of this company, so represented as the vendors, was designed to indicate that the purchase was made by the respondents on behalf of the consumers, the ice factory. In a letter written by the respondents to the appellants on November 9, 1917, the writers state that they have not bought the coal from the persons mentioned in the indent, but from the colliery, and express a fear that the colliery proprietors "may refuse to supply coal to these people." The appellants replied on the same day, calming the fears of the respondents in reference to this piece of deception, and begging of them to instruct the colliery people to despatch coal under this special indent in favour of the proprietors of the Dhanjibhoy Ice Factory, Bombay. Thus by the arrangement of these two middlemen the indent is falsified, the regulations of the Government evaded, and possibly its officers deceived. On November 26, 1917, the appellants wrote to the respondents requiring delivery of 200 tons of steam coal under their contract of October 11, 1917. Thus by the arrangement of these two middlemen the indent is falsified, the regulations of the Government evaded, and possibly its officers deceived. On November 26, 1917, the appellants wrote to the respondents requiring delivery of 200 tons of steam coal under their contract of October 11, 1917. On the next day the respondents reply that they are receiving coals from the Deputy Controller, and would be pleased to deliver the appellants fifty tons of it next day, November 28, 1917. The appellants wrote refusing to take delivery of this comparatively small quantity of coal and demanding delivery at the earliest date of the full quantity in arrear. On December 10, 1917, the appellants wrote to the respondents demanding the delivery next day of 100 tons of coal. To this letter the respondents replied next day that they are expecting to receive soon a good lot of coal and asking the appellants to wait a little. On January 18, 1918, the appellants wrote to the respondents, referring to their contract of October 11, 1917, stating that the writers had only received from them 217 tons 19 cwt., that the instalments for December, 1917, and January, 1918, were due, and that the writers were ready to accept delivery of these instalments and asking for immediate delivery of them. On March 7, 1918, the appellants again wrote to the respondents demanding delivery of the instalments due. On March 7 the respondents wrote making an excuse for non-delivery. To the last letter the appellants on the same day reply, that it is impossible for them to wait longer for the coal due to them, that as they desire to keep up the connection they will wait till Monday, March 11, and that if the respondents then fail to deliver to them the coal they are entitled to receive, they will be reluctantly compelled to purchase same in the local market at the risk of the respondents and on their account, and further, that they will claim the market difference. On March 13 the appellants wrote to the respondents informing them that being much in want of coal, they had purchased 150 tons at the market price of Rs.71 per ton. Two days later they sent to the respondents a bill for Rs.7959-6, being Rs. 53-1 per ton difference between the Law Rep. 50 Ind. App. On March 13 the appellants wrote to the respondents informing them that being much in want of coal, they had purchased 150 tons at the market price of Rs.71 per ton. Two days later they sent to the respondents a bill for Rs.7959-6, being Rs. 53-1 per ton difference between the Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 14 contract price and the price they paid on the 150 tons so purchased. On March 18, , 1918, the appellants wrote to the respondents setting forth precisely how as regards the fulfilment of the contract of October 11, 1918, matters stood. They point out that of the 800 tons (200 tons per month for four months) contracted to be delivered, they have only received 335 tons 6 cwt. up to February 28, 1918, that the balance in arrear on the contract therefore amounted on that date to 464 tons 14 cwt., that the instalment of 200 tons for March was already overdue, that they were compelled to buy 150 tons at the market rate on the account of the respondents, and that they therefore claim the difference between the contract price and the market price on the 150 tons so purchased. It will be observed that the respondents did not suggest that there was not an open market for the sale and purchase of steam coal in Bombay. Nor up to the above date had they suggested that the appellants were joint adventurers in the enterprise of selling and delivering or procuring to be sold and delivered to the ice factory 1200 tons of Bombay steam coal, nor yet that the appellants had sub-contracted with the ice factory to deliver 1200 tons of steam coal to it. On the contrary, the respondents treat the appellants as purchasers from them of this 1200 tons of steam coal under the contract of October 11, 1917, to whom they were bound to deliver the coal purchased. But on March 22, 1918, the respondents wrote a letter in which, after stating that they were surprised at the appellants making a demand for a difference of Rs.53-1 on 150 tons, they put forward for the first time the contention that the appellants were bound to deliver the coals deliverable under the contract of October 11, 1917, to the ice factory. They state "You know that the Dhanjibhoy Ice Factory is the consumer of the coal, and the contracted coal is to be supplied to them and to no one else. Before we send a reply to you in respect of the damages claimed by you, please let us know at once whether you delivered these coals to the Dhanjibhoy Ice Factory, or not, and if so, what quantity." And then, after a long explanation as to the causes which prevented the receipt and delivery of the coals they expected, they said " We fail to understand the reason of your buying coals from the market for the Dhanjibhoy Ice Factory unless they were refused on their application to the Deputy Controller to supply them from Government reserve stock." They added that they repudiated any liability to pay damages, and they requested payment of Rs.3940 which they said was due to them. To this letter the appellants reply, stating that the respondents know well that they are bound to give the appellants the delivery guaranteed from stock, and that in spite of their repeated requests, as they have failed to carry out their contract, the appellants are obliged to claim the damages mentioned in their previous letter. They add "We are convinced that by putting forth such queries your intention is to avoid delivery of the instalment for the month of March, 1918, which we regret we are unable to allow you for a moment." The appellants have sued to recover damages for the respondents breach of the contract of October 11, 1917, consisting in the non-delivery of the goods contracted to be delivered. They naturally claimed to recover the difference between the price which they contracted to pay for these goods and the market price at which they could have sold them. Had the goods been delivered and no questions of a sub-contract arisen, they would have cost the appellants the contract price, and had they been delivered they could have sold them at the market price, which would be presumably their value. The appellants by the non-delivery have lost the money which they might have secured—namely, the difference between these two prices. They have been damnified to that extent. In para. The appellants by the non-delivery have lost the money which they might have secured—namely, the difference between these two prices. They have been damnified to that extent. In para. 7 of the statement of defence filed by the respondents it is alleged that on November 8, 1917, the appellants informed the respondents that they, the appellants, had agreed (it is not said with whom) to sell the coal received under this contract to the Dhanjibhoy Ice Factory, Bombay, The whole correspondence which took place between the parties is utterly inconsistent with this assertion, and the parol evidence does not, in any way, sustain it. It appears to their Lordships that this case does not at all resemble those cases Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 15 in which, for instance, A. contracts with B. to sell and deliver to B. certain commodities, and then contracts with C. to buy from him similar commodities in order to implement his contract with B., informing C. at the time he buys, of the special purpose to which he intends to devote those commodities. In such a case if C. does not deliver the commodities to A., questions may arise as to whether the damages to which he, C, would become liable for his breach of contract were not to be augmented by the extra loss A. sustains by reason of the non-fulfilment of his contract with B. The authorities in England seem to go the length of holding that notice to C. of the special purpose for which A. requires the goods is not enough ; that to make C. liable for the additional damage he must have, expressly or implied, contracted to run the additional risk Home v. Midland Ry. Co. (( 1874)L. R. 8C. P. 131. [See however the later cases of Hydraulic Engineering Co. v. McHaffie ( 1878) 4 Q. B. D. 670, 677; Agius v. Great Western Colliery Co. [ 1899] 1 Q. B. 413.—F. P.]) Sir George Lowndes contended, however, that under s. 73 of the Indian Contract Act, 1872, notice would be enough to make a vendor liable though he did not contract to run the risk, to which Blackburn J. refers in the case just cited. [ 1899] 1 Q. B. 413.—F. P.]) Sir George Lowndes contended, however, that under s. 73 of the Indian Contract Act, 1872, notice would be enough to make a vendor liable though he did not contract to run the risk, to which Blackburn J. refers in the case just cited. It does not appear to their Lordships to be necessary to decide that question, as in their view there is no evidence, oral or written, to establish that the appellants had sub-contracted with any person or body to deliver to the ice factory the whole, or any portion, of the coal they had purchased from the respondents, when they should receive it or at any time thereafter. The parties agreed that the coal in fact delivered by the respondents to the appellants only amounted to 315 tons 16 cwt. Five issues were settled for the respondents. Two of them alone would seem to be of importance. No issue was raised as to whether the appellants ever contracted to deliver over to the Ice Factory Co. the coals they might receive from the respondents. The two important issues were whether the contract sued upon did not become impossible of performance, and whether the appellants were entitled to any damages, and if so how much. Upon those two issues the respondents appear to have concentrated all their efforts. The trial judge, rightly in their Lordships opinion, held in favour of the appellants on those issues. Ramavtar Maini, one of the partners of the respondents firm, admitted that coal was available and could be purchased in the local market, and it was admitted that at no time was an absolute embargo placed on the supply of coal from the Garraria Colliery. The trial judge awarded to the appellants Rs. 17,508-6-5 as damages. The appellate Court set forth their ground of decision in the following passages of their judgment. Macleod C.J. said "The defendants knew that the plaintiffs could only deliver coal to the party who signed the indent. The plaintiffs must have known that they could not deal with that coal in the open market. The only profit they could make out of the contract was the difference between the contract price and the price the indentor (the Ice Factory Co.) would pay them. The plaintiffs must have known that they could not deal with that coal in the open market. The only profit they could make out of the contract was the difference between the contract price and the price the indentor (the Ice Factory Co.) would pay them. It must be taken, therefore, when the contract was made that both the parties knew that the only profit the plaintiffs could make would be the difference between their contract and the contract they might make with either the indentor or an intended party, and would at the most provide the measure of damages." Heaton J. expresses a practically identical opinion. He says "The purpose of the contract was to procure coal for one particular customer, and, therefore, under the contract, the coal, if procured, had to go to that particular consumer, or as to part, might be used to replenish coal in stock from which that consumer had been supplied." Their Lordships are unable to accept these views. As between the appellants and the respondents there was no contract to supply to the former the identical coal obtained from the collieries. On the contrary, it was expressly provided that the coal purchased from the respondents was to be supplied from the respondents stock. Again, as already pointed out, no contract was entered into between the appellants and the respondents or between the appellants and the ice factory that the appellants should deliver over to the ice factory the coal that should be delivered to them under Law Rep. 50 Ind. App. 142 ( 1922- 1923) Keshavlal Brothers and Company V. Diwanchand and Company 16 the contract of October 11, 1917. The indent was, no doubt, manipulated in the way that has been already pointed out in order to get the use of the wagons. The appellants name does not appear on the indent; the respondents does appear. No evidence was given as to the particular relations between the respondents and the ice factory. Their Lordships are therefore of opinion that whatever those relations may have been, and whatever obligations rest upon the respondents, the appellants would not have been bound, had the agreement of October 11 been performed, to sell or deliver to the ice factory the coals which should be delivered to the appellants out of the respondents stock. They do not think that the ice factory was the appellants only customer. They do not think that the ice factory was the appellants only customer. Their view is that had the coals purchased been delivered to the appellants in pursuance of their contract, the latter would have been entitled to sell them in the open market at the market price, and that being so, the damages were rightly assessed at the difference between the contract price and that market price. Their Lordships are therefore of opinion that the judgment appealed from was wrong and should be reversed and the judgment and decree of Kajiji J. be restored, and they will humbly advise His Majesty accordingly. The respondents must pay the costs of the appellants here and in the Courts below.