Full Judgment Text
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PETITIONER:
RADHAKRISHNA SIVADUTTA RAI AND ORS.
Vs.
RESPONDENT:
TAYEBALLI DAWOODBEAI
DATE OF JUDGMENT:
13/10/1961
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
SINHA, BHUVNESHWAR P.(CJ)
DAYAL, RAGHUBAR
CITATION:
1962 AIR 538 1962 SCR Supl. (1) 81
CITATOR INFO :
RF 1968 SC1308 (9)
ACT:
Breach of contract-Suit for damages-Brokers’
bought and sold notes, if and when constitute
terms of the contract-Commercial usage-Contract on
behalf of disclosed partner-Maintainabtlity of
suit-Indian Contract Act, 1872 (9 of 1872), 8.
230.
HEADNOTE:
The appellant sued the respondent for damages
for breach of contract. The respondent pleaded
that the appellant had contracted as agent for its
disclosed principal and had no right to sue. The
bought and sold notes issued by the brokers showed
that the appellant had entered into the contract
on account of the disclosed principal; but in the
confirmation slips and subsequent letters
exchanged between the parties no reference was
made to the principal nor did the appellants
describe themselves as acting or signing on his
behalf.
^
Held, that it is well established in
commercial usage that the bought and sold notes
issued by the brokers, where
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there is no variation or disparity between them,
constitute the contract that must bind the
parties.
But where the bought and sold notes show
material variations, neither of them nor both of
them taken together can be relied upon for proving
the terms of the contract.
Since there was no disparity in the instant
case between the two notes which specifically
mentioned the appellants as acting on account of
the disclosed partner, it must be held that the
appellants had entered into the contract on behalf
of the disclosed partner and as such was not
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entitled to sue.
Cowie v. Ramfry, (1846) 3 Moo. I. A. 448,
sievewright v. Archibald,(1851) 117 E.R. 1221, Ah
Shain Shoke v. Moothia Chetty (1899) L. R. 27 I.
A. 30 and Gadd v. Houghton (1876) I Ex. D. 357,
referred to.
Held, further, that in deciding whether or
not the agent had entered into the contract on
behalf of the principal, the way he signed the
document must be considered in the light of the
recitals in the relevant document. In the instant
case, the letters and the confirmation slips must
be read in the light of the bought and sold notes
and presumed to be consistent with them and it
would, therefore, be unreasonable to attach undue
importance to the signature or how the parties
described themselves.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 212 of 1959.
Appeal from the judgment and decree dated
March 1, 1957, of the calcutta High Court in
appeal from original Decree No. 71 of 1954.
G. S. Pathak and Naunit Lal, for the
appellants.
A. V. Viswanatha Sastri, S. N. Andley,
Rameshwar Nath and P. L. Vohra, for the
respondent.
1961. October 13. The Judgment of the Court
was delivered by
GAJENDRAGADKAR, J.-This appeal by a
certificate granted by the Calcutta High Court
arises out of a suit filed by the three appellants
against the respondent to recover Rs. 83,640/-.
The three appellants are respectively the Firm
Radhakrishan Shivdutt Rai which carries on
business at Banaras and RamKumar Lal for himself
and as karta of his joint family as well as Madan
Gopal for himself and as karta of his joint
family, the latter two being
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the partners in the first-mentioned Firm
Radhakrishna Sivadutta Rai; for convenience we
will refer to the partnership firm hereafter as
the appellant. The respondent Tayeballi Dawoodbhai
is a partnership firm which carries on business at
Calcutta. The appellant’s case was that the
appellant and the respondent had entered into a
contract in the first instance on December 18,
1980, through brokers named T. N. Mehrotra &
co.,Calcutta. This contract was later confirmed by
two letters written respectively on January 3 and
15, 1951, by the appellant to the respondent and
replied to by the. respondent. By this contract
the respondent agreed to sell 1000 bales of
Banaras Hemp particulars of which were set out in
the plaint. According to the appellant, by a
letter written on March 14, 1951, the appellant in
part performance of the said contract accepted
delivery of 110 bales of Banaras Hemp No. 1 and 50
bales of Banaras Hemp No. 2; this delivery was
Made by the respondent to L. N. Poddar & Co., who
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acted as the agent of the appellant and Paid the
price of the said 160 bales. In they transaction
the respondent realised Rs. 3,840 from the said
I,. N. Poddar &; Co. in excess of the actual price
of the goods delivered to the said company.
Inspite of the repeated demands made by the
appellant the respondent failed to deliver the
balance of the goods contracted for and thus
committed breach of the contract. That is how the
appellant claimed Rs.(9,80(j as difference between
the market rate on March 31, 1951, and the
contract rate of the balance deliverable under the
contract in suit. This amount was claimed as
damages for the breach of contract. In addition an
amount of Rs. 3,840 was claimed as having been
paid in excess of tho value of 160 bales delivered
to L. N. Poddar & Co., on behalf of the appellant.
This claim was resisted by the respondent on
several grounds. The principal contention urged by
the respondent, however, was that in relation to
84
the contract in suit the appellant had acted as
agent for its disclosed principal Messrs Khaitan
and Sons Ltd., and as such it was not entitled to
bring the present suit. The respondent further
alleged that the said disclosed principal Messrs.
Khaitan and J. Sons had settled all their rights
and loams under the suit contract with their agent
and so the present claim for damages was not
maintainable. In regard to the claim for Rs. 3,840
tho respondent pleaded that the appellant’s case
was untrue. Several other pleas were also raised
but with the said pleas we are not concerned in
the present appeal.
Mr. Justice Bose who tried the suit framed
twelve issues. On the principal point in
controversy between the parties the learned judge
found that the appellant had entered into the
contract with the respondent on its own account
and not on account of the disclosed principal as
alleged by the respondent. According to the
learned judge the reference to Messrs. Khaitan and
Sons Ltd., made in the bought and sold notes on
which the respondent’s plea was based had been
inserted by the brokers "by mistake or due to some
misconception." The learned judge also found that
the respondent had committed a breach of the
contract as alleged by the appellant. The
appellant’s case with regard to the excess payment
of Rs. 3,840 made by L. N. Poddar & co. was,
however, held not to have been proved. In the
result a decree was passed in favour of the
appellant for Rs. 79,800 along with interest as
stipulated in the decree.
Against this decree the respondent preferred
an appeal; and the main point which was urged on
its behalf was directed against the finding of the
trial judge that the contract had been entered
into by the appellant for itself and not on
account of the disclosed principal. This
contention was based in the Court of Appeal, as in
the trial court, on the bought and sold notes; and
it was urged that
85
the bought and sold notes clearly showed that the
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appellant had entered into the contract on account
of the disclosed principal Messrs. Khaitan and
Sons Ltd. Before the Appellate Court the
respondent’s case was that the said bought and
sold notes constituted the terms. Of the contract
and no other evidence was relevant and admissible
in order to determine the said terms. Das Gupta,
J., upheld this. plea. In his opinion the bought
and sold notes issued by the brokers Constituted
the sole basis for the terms. Of the contract and
the two letters subsequently written on January 3
and 15, 1951, were inadmissible and irrelevant for
the purpose of determining the said terms of the
contract. Tho learned judge, however, considered
tho matter also on the alternative basis. that the
said letters could be considered for ascertaining
the terms. Of the contract and came to the
conclusion that can reading the said letters and
the bought and sold notes together the result was
the same, namely, that the contract had been
entered into by the appellant on behalf of the
disclosed principal. Bachawat, J., differed from
Das Gupta, J., on the question about the relevance
and admissibility of the two subsequent letters.
According to him the two bought and sold notes.
and the two letters between them constituted the
terms of the contract. He was inclined to take the
view that the letters could not be regarded as
inadmissible or irrelevant. Reading the four
documents together the learned judge. however,
agreed with the conclusion alternatively recorded
by Das Gupta, J., and held that the four documents
supported the respondent’s plea that the appellant
had entered into the contract on behalf of the
disclosed principal. Both the learned judges
agreed in holding that there was no evidence to
support the appellants plea that the reference to
the principal made in the bought and sold notes
was a result of any mistake. On these findings the
decree passed by the trial court was reversed and
the appellant’s suit Was ordered to be dismissed.
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In regard to the costs, however, the Appellante
Could took the view that the point raised before
the Appellate Court about the effect of the bought
and field notes had not been specifically mooted
before the trial court and that several other
pleas raised by the respondent were found by the
trial court to be false and so the proper older as
to costs would be that each party should bear its
costs throughout.
After this judgement was delivered the
appellant applied for and obtained a certificate
from the High Court and it is with the said
certificate that the present appeal has been
brought before this Court. On its behalf Mr.
Pathak has strenuously contended that the
Appellate Court was in error in coming to the
conclusion that the contracts in suit had been
entered into by the appellant on behalf of the
disclosed principal Messrs. Khaitan & Sons Ltd.,
Banaras. For the purpose of deciding this point we
propose to assume in favour of the appellant that
the terms of the contract may be gathered from the
two bought and sold notes on which the respondent
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relies as well as the two subsequent letters on
which the appellant relies.
It would be convenient at this stage to set
out the said documents. We will first refer to the
brokers’ notes and the confirmation slips in
respect thereon. This is how the brokers’ notes
read:
"T. N. Mehrotra and Co. No. 377
Hemp, Oil and Oil Seedh Pollock House
Brokers. (3rd Floor)
28-A, Pollock Street.
Any dispute in connection with this deal
is subject to Arbitration by Bengal Chamber
of Commerce.
Calcutta, 18-12-1950.
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Radhakrishna Sivadutta Rai,
A/c Khetan and Sons Ltd.,
Shewpur, Banaras.
Dear Sirs,
We confirm having purchased on your
account and risk under noted goods from
Messrs. Tayeballi Dawoodbhai, 20, Zakaria
Street, Calcutta.
Commodity: 500 (five hundred) bales of
Banaras No. 1 only with Agmark Jan/March ’51
at K. P. Docks @ Rs. 165 per bale of 400 lbs.
each on receipt of the goods.
Yours faithfully,
For T. N. Mehrotra and Company,
Sd. T. N. Mehrotra.
Sales Tax number should be furnished by
the Buyers otherwise to be charged."
"T. N. Mehrotra and Co. No. 378
Hemp, oil and oil Seeds Pollock House
Brokers (3rd Floor)
Bank 4718 29-A Pollock street
Tel:
B.K. 1914 Calcutta, 18-12-50.
Any dispute in connection with this deal
is subject to arbitration by Bengal Chamber
of Commerce.
To: M/s. Tayeballi Dawoodbhai,
20, Zakaria Street,
Calcutta.
Dear Sirs,
We confirm having sold on your account
and risk, the under noted goods, to M/s.
Radakrishan Shiv Dutt Rai with A. G. Mark.
A/c Khetan and Sons Ltd.,
Shewpur, Banaras.
Commodity: (500) Five hundred Bales of
Banaras No. 1 only with A. G. Mark.
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Delivery: Jan./March 1951 at K. P. Dock.
Price: @ Rs. 165 per bale of 400 Ibs. each.
Terms of Payment on receipt of goods.
Brokerage 0-8-O per bale.
Sales Tax number should be finished by
the buyer otherwise to be charged.
Yours faithfully,
For T. N. Mehrotra & Co.,
Sd. T. N. Mehrotra
"To
M/s. T. N. Mehrotra & Co.,
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Calcutta.
We acknowledge receipt of your purchase
confirmation memo No. 377 dated 18-12-50.
Signature: Gopal Lal Gupta
For
Radhakrishna Shivadutta Rai."
"To
M/s. T. N. Mehrotra & Co.,
Calcutta.
We acknowledge receipt of your purchase
confirmation memo. No. 378 dated 18-12-50.
Signature: Gopal Lal Gupta
For
Radhakrishna Sivadutt Rai".
The said confirmation slips were signed
by Gopal Lal Gupta for the firm of
Radhakrishna Shivdutt Rai."
After the said notes were sent by the brokers
to the respective parties Gopal Lal Gupta on
behalf of the appellant wrote a letter to the
respondent on January 3, 1951, and on January 15.
1951 the respondent wrote a letter to the
appellant. These letters read at follows:
"Messrs. Tayeballi Dawoodbhai, 3-1-
51.
20, Zakaria Street,
Calcutta.
Dear sirs,
We have boughS from you one thousand
bales of Banaras Hemp through Messrs. T. N.
Mehrotra & Co., 28-A, Pollock Street,
Calcutta, on the following terms:
89
1. 500 (Five hundred) bales Banaras No.
1 with agmark @ Rs. 166 (one hundred and
sixtyfive) per bale of about 400 lbs.
delivery K. P. Docks during January/March
1951.
2. 500 (Five hundred) bales Banaras No.
II with agmark @ Rs. 145 (one hundred and
fortyfive) per bale of about 400 lbs.
delivery E. P. Docks during January/March
1951. Please note and confirm.
Yours faithfully,
for Radhakrishna Shivdutt Rai
Sd. Gopal Lal Gupta."
"Tayoballi Dawoodbhai 20, Zakaria
Street,
Registered. Calcutta- 1.
Calcutta, 15th January, 1951.
Messrs. Radhakrishna Shivadutt Rai,
Banaras.
Dear Sirs,
We confirm having sold to you through
Messrs. T. N. Mehrotra & Co., Calcutta, 1000
(one thousand) bales of Banaras Hemp as
follows:
(i) 500 (Five hundred) bales Banaras
Hemp No. I with Agmark at Rs. 165 per bale of
about 400 Ibs. delivery K. P. Docks during
January/March 1951.
(ii) 500 (Five hundred) bales Banaras
Hemp No. II with Agmark at Rs. 145 per bale
of about 400 lbs. K. P. Docks delivery during
January/March 1951.
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This confirms your letter of 3rd
instant.
Yours faithfully,
for Tayeballi Dawoodbhai.
Sd. x x
Partner.
Copy to Messrs. T. N. Mehrotra & Co.,
Calcutta, and to Gopinath Mehrotra, Banaras."
Mr. Pathak contends that in construing the
effect of the relevant documents we should not
90
attach any importance to the reference to Khaitan
& Sons made in the bought and sold notes for the
simple reason that the said reference is the
result of a mistake or misconception on the part
of the brokers. In that connection he contended
that the J. finding recorded by the trial court on
the issue of mistake should be accepted by us and
not the finding made by the/ Appellate court. We
are not impressed by this argument. In regard to
these notes we have the evidence of Trilokinath
and Gopinath on behalf of the brokers which
negatives the theory of mistake or misconception.
Trilokinath has stated on oath that when he got
the offer from the respondent he telephoned to his
brother Gopinath who is a broker in respect of
hemp of the firm of Sewnath Gopinath and he told
him about the offer. Gopinath then informed
Trilokinath that the offer was closed either on
the 16th or on the morning of the 17th. This
information was received by Trilokinath from
Gopinath on the telephone. Trilokinath was then
asked about the information that his brother gave
him, and he stated that his brother told him that
the offer which he had communicated to him in
respect of 1000 bales at Rs. 165 and. Rs. 145 had
been sold by him to Khaitan Sons & Co., Fibre Ltd.
He also added that he received another message
from his brother either on the 18th or on the
night of the 17th to prepare a contract so that it
will be Khaitan & Sons through the appellant;
Thus, it is clear that the evidence of
Trilokinath, if believed, clearly shows that there
could be no mistake or misappreciation on the part
of the brokers, when the notes referred to Khaitan
& Sons as principal in respect of the transaction.
Gopinath substantially corroborated the evidence
given by Trilokinath. He stated that when he got
the offer from his brother Trilokinath he went to
Deokinandan who was working for Khaitan & Sons and
it was after discussion with Deokinandan thatthe
souda was closed as one on behalf of Khaitan &
Sons. Having thus closed this
91
contract with Deokinandan, who represented the
principal Khaitan & Sons, Gopinath told
Trilokinath to close the offer and asked him to
prepare the note showing that the appellant was
acting as agent for the disclosed principal
Khaitan & Sons. Reading the evidence of the two
brothers who worked as brokers in respect of the
transaction in suit it is clear that any
possibility of a mistake or misappreciation is
wholly excluded.
On behalf of the appellant Gopal Lal Gupta
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has given evidence. He attempted to explain away
the fact that he did not protest against, or
object to, the insertion of the name of Khaitan &
Sons in the notes by suggesting that when he
signed the confirmation slips after receiving the
notes he had not noticed the reference to Khaitan
& Sons. His case was that the purchase had been
made by the appellant for itself and not for any
other firm, and the suggestion he made was that if
he had noticed that the notes had made reference
to Khaitan & Sons he would either have insisted
upon the said name being delete(l or would not
have concluded the contract; but when his
statement that he did not notice the reference to
Khaitan & Sons was tested in cross-examination
Gopal Lal was shaken, and he had to admit that
when he signed the confirmation slip he may have
noticed the reference to Khaitan & Sons but he did
not read the document attentively. He was,
however, forced to concede that he had gone
through the note before he signed the confirmation
slip. It was under stress of cross-examination
that Gopal Lal incidentally mentioned that the
reference to Khaitan & Sons may have been made by
mistake. It is obvious that Gopal Lal’s evidence
which otherwiee suffers from the infirmity that it
is full of contradictions cannot be accepted on
the question of mistake because his explanation
about his conduct in signing the confirmation
slips considered by itself is wholly
unsatisfactory. Therefore, in our opinion, the
Appellate Court was fully justified in
92
reversing the finding of the trial court on this
point and in coming to the conclusion that the
reference to Khaitan & Sons which the notes made
was no the result of any mistake or misconception
In this connection it may be relevant to
refer to the attitude adopted by the appellant
when the dispute arising between the parties in
the present contract had gone before the Bengal
Chamber of Commerce for adjudication. In those
proceedings the respondent had raised the same
plea that it has raised in the present suit. It
was urged on its behalf that the appellant was not
entitled to make ally claim on the contract
because it had entered into the contract on behalf
of a disclosed principal and on its account.
Apparently that plea appears to have been accepted
and the arbitration proceedings therefore ended as
being without jurisdiction. In meeting the plea
raised by the respondent it is significant that
the appellant thought it fit to urge that the
respondent’s allegation that the appellant was the
agent of one Khaitan & Co. was not correct and
that there is no firm or company known as Khaitan
& Co. Or Khaitan & Sons, Ltd., or Khaitan & Sons
in Shewpur, Banaras. The appellant therefore
pleaded that the jurisdiction of the Chamber to
entertain the case could not be disputed on that
score. The appellant also alleged that the
reference to Khaitan &; Sons was superfluous and
no importance should be attached to the said
words. In the suit itself a faint attempt was no
doubt made to challenge the identity of the firm
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Khaitan Sc Sons, but Mr. Pathak has very fairly
not attempted to raise that point before us. It
would thus be noticed that the principal point
made by the appellant in the arbitration
proceedings before the Chamber in respect of the
reference to Khaitan & Sons in the notes was
entirely frivolous; no case of mistake appears to
have been set out at that state. Besides, as we
have already pointed out, there is no evidence on
which a finding of mistake can be reasonably made
in favour of the appellant. Therefore, we
93
must proceed to consider the question about the
construction of the relevant documents on the
basis that the reference to Khaitan & Sons which
the notes make is not the result of any mistake
and has been made in the ordinary course of
businesss by the brokers.
Let us then consider what the effect of the
bought and sold notes is according to the
established custom in the mercantile world. Mr.
Viswanatha Sastri, for the respondent, contends
that, according to the established commercial
usage, if there is no variation or disparity in
the bought and sold notes, the bought and sold
notes issued by the brokers constitute the terms
of the contract between the parties for whom the
brokers act. We are inclined to accept this
contention. The effect of such notes issued by the
brokers has been frequently considered by judicial
decisions. As early as 1846 the Privy council had
occasion to deal with this question in Cowie v.
Remfry (1). In that case a. C & Co and H.& Co;
were merchants at Calcutta. The latter sold to the
former a large quantity of indigo through the
medium of a broker who drew up a sold note
addressed to H.& Co. and submitted. it to H. for
his approval. H. Objected to a particular word
appearing in the note whereupon the broker took
the sold note to C. and informed him of His
objection. C. then struck his pen through the word
objected to by H. placed his initials over the
erasure and returned the note to the broker. The
broker then delivered it in that altered form to
H. & Co. Next day the broker delivered to C. & Co.
a bought note which differed in certain material
terms from the sold note. In an action brought by
H. & Co. against C. & Co. for the breach of the
contract as contained in the sold note the Supreme
Court at Calcutta was of the opinion that the sold
note alone formed the contract and so it decreed
the plaintiff’s suit. On appeal by the defendant
the Privy Council reversed
(1) (1846) 3 M.I.A.448
94
the finding of the Supreme Court and held
that the transaction was one of bought and sold
notes and Rai held that the circumstances
attending C.’s alteration of the sold note and
affixing his initials were not sufficient to make
that note alone a binding contract. According to
the Privy Council, there being a material
variation in the terms of the bought with the sold
note they together did not constitute a binding
contract. It would thus be seen that the Judicial
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Committee was dealing with a case where the bought
and sold notes did not tally and so the decision
was that where the bought and sold notes do not
tally the sold note alone cannot constitute the
terms of the contract. In dealing with this
question, however, their Lordships referred to the
mercantile custom in regard to the bought and sold
notes and observed that "the established usage of
dealing in the mercantile world should be held in
high respect; the very existence of such usage
shows that in practice it has been found useful
and beneficial; the presumption is in its favour,
and no departure from it is to be inferred from
doubtful circumstances". That is why the Privy
Council reached the conclusion that "this must be
considered as a transaction in the contemplation
of the parties by bought and sold notes, and that,
the contract is contained in both of the notes,
and not in one;" inevitably there being a material
variation between the two notes "the consequence
follows, from all legal principles, that no
binding contract has been effected". This decision
shows that the mercantile usage of entering into
contracts evidenced by the bought and sold notes
issued by the brokers was treated by the Privy
Council as well recognised.
The next decision to which reference may be
usefully made is the case of Sievewright v.
Archibald(l). In that case again there was a
variation in the bought and sold notes and the
variation was material, and so it was held that
there was no
(1) (1851) 117 E.R. 1221, 1228, 1229.
95
sufficient memorandum of a contract to satisfy the
Statute of Frauds. In dealing with the question
raised for the decision of the Court Lord
Campbell, C. J., has made certain general
observations which throw considerable light on the
genesis of the bought and sold notes and the
effect which is ually attributed to the said notes
by commercial usage. "If the bought note case be
considered a memorandum of the parol agreement",
observed Lord Campbell, C. J., "so may the sold
note; and which of them is to prevail ? It seems
to me, therefore, that we get back to the same
point at which we-were when the variance was first
objected, and the declaration was amended. I by no
means say that where there are bought and sold
notes they must necessarily be the only evidence
of the contract; circumstances may be imagined in
which they might be used as a memorandum of a
parol agreement. Where there has been an entry of
the contract by the broker in his book signed by
him, I should hold without hesitation,
notwithstanding some dicta, and a supposed ruling
of Lord Tenterden in Thornton v. Meux (M. & M.
43), to the contrary, that this entry is the
binding contract between tho parties and that a
mistake made by him, when sending them a copy of
it in the shape of a bought or sold note, would
not affect its validity. Being authorised by the
one to sel], and the other to buy, in the terms of
the contract, when he has reduced it into writing
and signed it as their common agent, it binds them
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both, according to the Statute of Frauds, as if
both had signed it with their own hands; the duty
of the broker requires him to do so; and till
recent times, this duty was scrupulously performed
by every broker. What are called the bought and
sold notes were sent by him to his principals by
way of information that he had acted upon their
instructions, but not as the actual contract which
was to be binding upon them. This; clearly appears
from the practice still followed of sending the
bought note to the buyer, and the sold
96
note to the seller; whereas, if these notes had
been meant to constitute the contract, the bought
note would be put into the hands of the seller,
and the sold note into the hands of the buyer,
that each might have the engagement of the other
party J, and not his own. But the broker, to save
himself trouble, now omits to enter and sign any
contract in his book, and still sends the bought
and sold notes as before. If these agree, they are
held the constitute a binding contrat; if there
be any material variance between them, they are
both nullities, and there is no binding contract.
This last proposition, though combated by the
plaintiff’s counsel, has been laid down and acted
upon in such a long series of oases that I could
not venture to contravene it, if I did not assent
to it; but, where there is no evidence of the
contract unless by the bought and sold notes sent
by the broker to the parties, I do not see how
there can be a binding contract unless they
substantially agree; for contracting parties must
consent to the same terms; and where the terms in
the two notes differ there can be no reason why
faith should be given to the one more than the
other". These observations seem to establish two
propositions, first that if the bought and sold
notes show a material variation neither of them
nor both of them taken together can be re. lied
upon for the purpose of proving the terms of the
contract, and second if the bought and sold notes
agree they are held to constitute a binding
contract. To the same effect is the observation
made by the Privy Council in Ah Shain Shoke v.
Moothia Chetty,(l) when Sir Richard Couch observed
that "Moothia Chetty, one of the respondents, said
in his evidence he did not consider the contract
as concluded until bought and sold notes were
signed. He was right in this. They were the only
evidence of the contract."
It is in the light of this legal position
that we must consider the effect of the bought and
sold
(1) (1899) L. R. 27 I.A. 30
97
notes in the present case. The notes referred to
the appellant and added "A/C Khaitan & Sons Ltd."
There is no disparity in the notes at all; and so
the two notes can be safely taken to evidence the
terms of the contract. When along with the name of
the appellant the notes specifically refer to a
"Khaitan & Sons Ltd." with the preceding words
"A/c’’, there can be no doubt that the appellant
is shown by the notes to be acting on account of
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the disclosed principal. The appellant realised
that the effect of the reference to Khaitan & Sons
in the notes would inevitably be to support the
plea of the respondent that it was not entitled to
bring the present action and so it pleaded that
the said reference was the result of a mistake.
Therefore, there can be no doubt that if the
material question had to be considered in the
light of the bought and sold notes alone the
appellant was acting on behalf of the disclosed
principal and, on the contract thus entered into,
it had no right to sue end can claim no cause of
action in its favour.
In Gadd v. Houghton (1), James, L. J.
Observed "when a man says that he is making a
contract ’on account of’ some one else, it seems
to me that he uses the very strongest terms the
English language affords to show that he is not
binding himself, but is binding his principal". In
that case fruit brokers in Liverpool gave a fruit
merchant a sold note which read thus: "We have
this day sold to you on account of James Morand &;
Co., Valentia, 2000 cases Valentia, oranges, of
the brand James Morand & Co., at 12s. 9d. per case
free on board", and the brokers signed the note
without any addition. The purchaser brought an
action against the broker for non-delivery of the
oranges. It was held that the words "on account of
James Morand & Co." showed the intention to make
the foreign principals and not the brokers liable
and that the brokers were not liable upon the
contract. It would be noticed that
(1)(1876) 1 Ex. 357.
98
in dealing with the question about the brokers
liability two points fell to be Gonsidered. The
first point in support of fixing the liability
with the brokers was that the brokers had signed
this note without describing themselves as acting
for the disclosed principals; and the argument was
that "when a man signs a contract in his name he
is prima facie a contracting party and liable and
there must be something very strong on the face of
the instrument to show that the liability does not
attach to him". This principle was accepted by the
learned judge who decided the case; but it was
pointed out that there was another fact which had
an overriding effect and that was that the note
showed that the brokers were acting for the
diclosed principal, and that fact clearly repelled
the brokers’ liability in regard to the contract.
In dealing with the argument about the effect of
the signature Mellish, L. J. Observed "when the
signature comes at the end you apply it to
everything which occurs throughout the contract.
If all that appears is that the agent has been
making a contract on behalf of some other person,
it seems to me to follow of necessity that that
other person is the person liable. This is one of
the simplest possible case. How can the words ’on
account of Morand & Co.’. be inserted merely as a
description ? The words mean that Morand & Co. are
the people who have sold. It follows that the
persons who have signed are merely the brokers and
are not liable". We have referred to there
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observations made by Mellish, L. J., because as we
will presently point out they would be of material
assistance in deciding the point which Mr. Pathak
has raised on the strength of the two subsequent
letters. Thus, the bought and sold notes in this
case unambiguously indicate that the appellant was
acting for a disclosed principal and the
contracting party was the disclosed principal and
no other.
It is, however, urged by Mr. Pathak that
before determining the terms of the contract and
the
99
parties to it we must read the notes in question
along with the two letters. We have already seen
the sequence of the documents. First, the notes
were delivered by the brokers to the appellant and
the respondent. Then the respective parties filed
confirmation slips and then followed the two
letters exchanged between them. Mr. Pathak
contends that in its letter addressed to the
respondent the apellant has definitely stated that
’they’ had bought from the respondent 1000 bales
in question. Mr. Pathak places considerable
emphasis on the use of the word "we" without
reference to the principal; and he also relies on
the fact that the letter is signed by the
appellant without describing itself as acting on
behalf of the principal already disclosed.
Similarly he relies on the statement of the
respondent’s letter to the appellant that the
respondent had sold to the appellant "to you" the
bales in question. According to Mr. Pathak the
significance of these letters should not be
underestimated in determining the parties to the
contrat. There is no doubt, and indeed it is a
matter of common-ground before us, that the
letters do not constitute all the terms of the
contract, and all that is urged by Mr. Pathak is
that they should be consider along with the notes.
The notes refer to the fact that if any dispute
arises in the deal it is subject to the
arbitration by the Bengal Chamber of Commerce.
They also refer to the sales tax number which is
to be furnished by the buyers, otherwise they
would be charged. These terms undoubtedly
constitute terms of the contract; but the argument
is that in the correspondence which took place
between the parties there is no reference to the
principal and indeed the correspondence proceeds
on the basis that the appellant acts for itself
and not for a disclosed principal, and that Should
be borne in mind in deciding whether the appellant
was acting for tho disclosed principal or not.
100
In support of his argument that the signature
of the appellant to its letter of January 3, 1951,
and the use of the word "we" in the first
paragraph of he letter indicate that the appellant
was acting for hi itself. Mr. Pathak relies on a
decision of the King’s. Bench Division in H. O.
Brandt & Co. v. H.N. Morris o. Ltd. (1). In that
case the plaintiffs who carried on business in
Manchester gave to the defendants a bought note
dated September 3, 1914. This note was addressed
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to the defendants and was headed From Messrs. H.O.
Brandt & Co., 63 Granby Row Manchester, For and on
behalf of Messrs. Sayles Bleacheries, Salesville,
Rhode, Island, U. S. A.". The note stated "we have
this day bought from you 60 tone pure an line oil"
and it was signed "H. O. Brandt & Co.". The
plaintiffs sued for non-delivery of the oil. Their
claim was resisted on the ground that they had
entered into the contract on behalf of a disclosed
principal and therefore were not entitled to be
sued. It was held by Viscount Reading, C. J., and
Scranton, L. J., Neville, J., dissenting, that the
plaintiffs were the contracting parties and were
entitled to sue upon the contract. The majority
decision was based on three grounds. The first
ground was that the plaintiffs had signed the note
without describing themselves as acting on behalf
of the principal and so it was held following the
language used by Mellish, L. J., in the case of
Gadd (2) that prima facie when a man signs a
document in his own name and states therein "I
have this day bought from you" he is the person
liable on the contract. The second consideration
was that the reference to the foreign principal
was made in the note in order to declare the
destination of the goods. There wax evidence
adduced in the case to show that during wartime
the destination of goods intended for export had
to be made known. Therefore the reference to the
foreign principal was treated as having been made
for the purpose of meeting the said
(1) [1917] 2 K B. 784. (2) (1876)1 Ex. D. 357.
101
requirement; and the third circumstance was that
the plaintiff’s statement at the head of the note
that they were acting for and on behalf of a
foreign principal could not get rid of the prima
facie presumption that a person signing a contract
in his own name is personally liable on it. It
would thus be seen that the rule of construction
which prescribes that if a person signs a contract
prima facie he is the contracting party prevailed
in that case because the reference to the
disclosed principal was otherwise explained as
serving another purpose altogether. The said rule
of construction prevailed also for the additional
reason that the plaintiffs were acting for a
foreign principal. It would be remembered that 8.
230 of the Indian Contract Act provides that in
the absence of any contract to that effect, an
agent cannot personally enforce contracts entered
into by him on behalf of his principal, nor is he
personally bound by them. There are, however,
three cases specified in the section where such a
contract would be presumed to exist; one of these
cases is where a contract is made by an agent for
sale or purchase of goods for a merchant resident
abroad. In other words, under s. 230 if an agent
enters into a contract for a disclosed foreign
principal the main provision of s. 230 will not
apply because there would be a presumption that
there is a contract to the contrary under which
the agent would be personally bound by the
contract notwithstanding the fact that he has
entered into it on behalf of a foreign principal.
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Therefore, we are not prepared to hold that the
decision in the case of H. C. Brandt & Co. (1)
lays down an unqualified rule of construction on
which the appellant can rely. In fact, it may be
pointed out that Neville, J., who dissented from
the majority view, has significantly observed that
"I rather gaudier that I should not have found
myself in isolation on this point were it not for
the fact that during the war there is an
obligation to disclose the destination
(1) [1917] 2 K.B.784.
102
of the goods". this observation shows that
reference to the disclosed principal was not given
its full effect in considering the question about
the liability of the agent because it was held by
the majority decision that the said reference was
primarily, if not exclusively, made for the
purposes of disclosing the destination of the
goods.
In support of his argument that the relevant
recitals in the two letters show that the contract
had been entered into by the appellant on its own
behalf Mr. Pathak has also referred us to the
statement of the law made by Bowstead on "Agency".
"The question whether the agent is to be deemed to
have contracted personally," it is observed, "in
the ease of contract in writing other than a bill
of exchange, promissory note, or cheque, depends
upon the intention of the parties, as appearing
from the terms of the written agreement as a
whole, the construction whereof is a matter of a
law for the Court-(a) if the contract be signed by
the agent in his own name without qualification,
he is deemed to have contracted personally, unless
a contrary intention plainly appear from other
portions of the document, (b) if the agent add
words to his signature, indicating that he signs
as an agent, or for or on behalf of a principal,
he is deemed not to have contracted personally,
unless it plainly appears from other portions of
the document, that, notwithstanding such qualified
signature, he intended to bind himself." In
conclusion it is added that "effect should be
given to every word used and none should be
rejected unless it is apparent that they have been
introduce per incuriam" (P. 266, Art. 116). These
observations do not carry the appellant’s case
very for because all that they show is that in
determining the question as to whether the agent
has entered into the contract on behalf of the
principal or not the way he has signed the
document has to be considered along with the other
recitals made in the relevant documents.
103
What then would be the effect of the relevant
recitals in the letter on which Mr. Pathak relies?
In this connection it is necessary to recall that
we are reading these letters along with the bought
and sold notes, and that the bought and sold notes
have unequivocally and clearly indicated that the
appellant was acting on behalf and on account of
the disclosed principal Khaitan & Sons. If we read
the letters in the light of the bought and sold
notes it would be clear that the signature of the
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appellant will not have much significance, nor
would the use of the word "we" by the appellant or
"you" by the respondent make any difference.
Parties knew that the appellant was acting on
behalf of the disclosed principal. It is not
suggested that in such a case every time the agent
has to sign expressly stating that he is acting on
behalf of the disclosed principal. Therefore, if
the appellant was acting for the disclosed
principal the fact that he did not add the
relevant description to his signature, or used the
word "we" in the operative portion of the letter
would not materially alter the fact spoken to by
the notes that the appellant was acting on behalf
of the disclosed principal. It cannot be suggested
that these letters intended to alter the position
disclosed by the notes. The letters, like the
confirmation slips, are and must be, presumed to
be consistent with the notes; and so it would be
unreasonable to attach undue importance to the
signature and to the use of the relevant words
"we" and "you" on which reliance has been placed.
In our opinion, therefore, the appellate Court was
right in holding that even if the bought and sold
notes are read along with the confirmation slips
and the two letters of January 3, 1961, and
January 15, 1951, the conclusion is inescapable
that the appellant entered into the contract on
behalf of the disclosed principal Khaitan & Sons
Ltd. If that be so, it follows as a matter of law
that the appellant is not entitled to bring the
present suit.
104
Mr. Pathak faintly attempted to argue in the
alternative that even if the appellant was acting
on behalf of the disclosed principal it would be
entitled to sue because from the subsequent
conduct of the parties a contract to the contrary
could be reasonably inferred. We have, however,
not allowed Mr. Pathak to argue this point. It was
conceded by the appellant before the Appellate
Court that if it was held that the plaintiff firm
was acting as agent for Khaitan & Sons Ltd., the
suit was not maintainable. This concession was
made in view of the provisions of s. 236 of the
Contract Act. Besides, the alternative plea which
Mr. Pathak wanted to raise does not appear to have
been expressly pleaded or considered in the trial
court.
In the result the appeal fails and is
dismmissed. In the circumstances of this case we
direct that the parties should bear their own
costs in this Court.
Appeal dismissed