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Madras High Court
The Krishna Jute And Cotton Mills … vs J. Innes And Ors. on 20 December, 1910
Equivalent citations: (1911) 21 MLJ 182
Author: Wallis


Wallis, J.

1. My answer to the reference is that in both the cases put the damages must be ascertained with reference to the date provided for the performance of the contract. When before the date fixed for performance of a contract the promisor refuses to perform it, and the promisee rightly rescinds it under Section 39 of the Indian Contract Act, he is under Section 75 entitled to “compensation for any damage which he has sustained through the non-fulfilment of the contract.” This appears to me to be the section applicable to the present case and I think that non-fulfilment of the contract means non-fulfilment at the date specified in the contract, and that, according to the proper construction of the section, compensation is to be ascertained with reference to that date, and not with reference to the date of the act of refusal which gave rise to the right to rescind. At the hearing of the appeal, however, and also at first on this reference, the case was argued as if the suit was one to recover compensation under Section 73 for a breach of contract, the breach in this case being the refusal of the promisor to perform the contract. This, however, is not the way in which the case has been dealt with in England Frost v. Knight (1872) L.R. 7 Ex. III, Rochester v. De La Tour (1853) 2 E. and B. 678 and I propose so to deal with it here both for this reason and because I think the result is the same whether the case is regarded as governed directly by Section 75 or Section 73. The breach being the defendants’ refusal to perform, the plaintiff is then entitled, under Section 73, to compensation for any loss or damage caused to him thereby which naturally arose in the usual course of things from such breach. This merely expresses the English rule as to the nature of damages in Hadley v. Baxendale (1854) 9 Ex. 341, so that the general principles upon which compensation or damages are to be assessed in cases of this kind are the same in India as in England and there is nothing in Section 73 to warrant the question being dealt with on different lines in India. When the Indian Contract Act was drafted and enacted the correct method of assessing damages in this particular case had not been clearly decided in England; otherwise seeing the importance of the point, it would probably have been dealt with in an illustration to Section 73 or Section 75. But in February 1872, the year in which the Indian Contract Act was passed, it was held in England, by the Court of Exchequer Chamber in Frost v. Knight (1872) L.R. 7 Ex. III and by the Court of Exchequer in the following June in Brown v. Muller (1872) L.R. 7 Ex. 319, though only obiter – that the damages were to be estimated with refer to the time fixed for performance in the contract. In the following year (1873) the point was expressly decided in Roper v. Johnson (1873) L.R.C. 8 167, in which the refusal to perform, the bringing of the action and the trial all took place before the date for performance specified in the contract, and after the case had been argued by two of the foremost lawyers of the day, Holker on the one side and Herschell on the other, it was held that the true measure of damages was prima facie the difference between the contract price and the market price at the date fixed for delivery although that date had not arrived when the action was brought and the suit tried. The decision dealing with an important question of every-day occurrence in a commercial country has now been treated as settled law for nearly thirty years in England, and also I think I may say in India, having regard to the frequency with which the point must have arisen and the absence of any reported cases to the contrary. As regards the Original Side of this Court, I can speak personally to its having been followed in several unreported cases. In these circumstances, I should1 be of opinion that it ought to be followed even if I ventured to differ from the reasons given in the judgments. On the contrary, those judgments, especially that of Brett J., afterwards Lord Esher, appear to me to be conclusive; and further it seems to me that the alternative method of ascertaining the compensation with reference exclusively to the date of the breach, viz., the refusal to perform, would in many cases fail to give compensation for the loss or damage naturally arising in the usual course of things from the breach, and so fail to satisfy Section 73

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