1969 PLP 428 (SCMR)

In October 1948, the Sind Government with the concurrence of the Central Government invited tenders for export of 2,700 tons of muttar dall to any destination outside Pakistan. On the 1lth of October 1948, the appellants offered to export the goods at Rs. 34‑4‑0 per bag of 2 1/2 maunds net including the bardana with permission to export the same to any place outside Pakistan. The condition of the offer was that no quantity will be given to anyone else for export outside Pakistan and the entire quantity will be given to the appellants. The offer was accepted by the Sind Government on the 16th November 1948. The appellants were asked to deposit Rs. 30,000 as security and to lift the entire stock at their risk within two months on payment for each lot in advance. On advance payment they were permitted to lift the first lot of 2000 bags within three days. The security deposit was, made on the 16th November 1948, and on that date a further sum. of Rs. 68,500 was paid in advance towards the price of 2000 tons. The permits for export were issued by the Sind Government but, they were not accepted by the Customs authority. On the 19th November 1948, the Government of Sind recommended the case of the appellants to the Central Government for issue of penmits. The permits were issued by the Central Government on the 28th December 1948, but they were actually delivered to the appellants on the 4th and the 5th of January 1949. The appellants by their letter dated the 26th March 1949, after pointing out that. they could not carry out the contract within the stipulated period' due to the delay in issuing the export permits, asked for extending the period of performing the contract for further three months.. The Government of Sind thereafter extended the period of the contract from time to time up to the 3rd June 1949. The appel lants, however, failed to perform the contract and therefore on the 13th of August 1949, the Government informed the appellants that if they failed to deposit costs of the balance of muttar dall' by the 18th of August 1949, the same shall be disposed of by them in any manner deemed fit at their risk and costs and without further reference to them. On the 24th September 1949, the Government advertised in the newspapers for the sale of the goods in question. No sale took place in pursuance to the notice. Later by private negotia tion, the goods were sold to Dinar Mills at the rate of Rs. 17 per bag of 2J maunds. The Government claimed that by this sale they suffered a loss of Rs. 4,05,083‑4‑

5. They, therefore, after deducting the security deposit of Rs. 30,000 filed on the 21st August 1951, suit No. 679 of 1951 in the Chief Court of Sind for the recovery of Rs. 3,75,083‑4‑

5. The appellants, on the 23rd December 1951, filed suit No. 1000 of 1951, for the refund of Rs. 30,000 being the security deposit paid by them. A learned Single Judge of the High Court of West Pakistan at Karachi tried both the Suits. A decree for Rs. 2,44,725 was passed in Suit No. 879 of 1951. Suit No. 1000 of 1951 was dismissed. On appeal a Division Bench of the High Court modified the decree passed in Suit No. 679 of 1951 by reducing the decretal amount by Rs. 54,

971. The decree of dismissal passed in suit No. 1000 of 1951 was affirmed. Leave to appeal was granted to consider the several points of law and fact which arose in these cases. The main stand of the appellants in the suits was that the goods in question were purchased by them on the implied under standing that valid export permits would be issued to them. The Sind Government, by issuing their own permits, acted illegally and caused delay in the performance of the contract. Consequently the contracts entered by the appellants with the foreign buyers fell through. When, however, the export licences were granted, the appellants, in ,spite of their best efforts, could not secure buyers in India and Ceylon where they intended to export these goods as by that time the Governments of these countries had imposed ban on the import of the goods in question. It was contended therefore that the contract became impossible of performance by the appellants and so they could not be said to be guilty of any breach of contract. If there was any breach it was on the part of the Government of Sind. The learned Judges of the High Court who decided the appeals found that there was an implied contract by the Govern ment of Sind to secure valid export permits. It was also held that there was delay in obtaining such permits. These facts, however, according to them, did not absolve the appellants from their liability for payment of damages. The learned Judges pointed out that the appellants, instead of terminating the contract on account of the delay in issuing valid export permits asked for time for its performance and kept it alive. They, later on, failed to perform the contract. It was therefore a case of breach of contract by them and not by the Government of Sind. The learned counsel for the appellants has challenged the finding of the learned Judges of the High Court with regard to the breach of the contract by calling in aid the doctrine of frustration. It will be seen that the plea of frustration was not taken in the written statement filed by the appellants. In view of the conclusion at which we have arrived in regard to this plea we have felt it unnecessary to examine in detail the evidence relating to the circumstances under which the appellants failed to send goods in question to India and Ceylon on account of the ban imposed by the Governments of these countries on the import of the goods in question. It is true that the Governments of these countries imposed ban on import of these goods but that by itself will not attract the doctrine of frustration. The contract did not specifically provide that the export word be to these countries. As a matter of fact no country was mentioned. The only thing that was provided in the contract was that the sale was for export only. A letter dated the 16th November 1948, written by the appellants to the Director of Civil Supplies, Sind, shows that export permits were asked for Bahrein, Goa and Cochin. There is no evidence on the record to show as to why export could not be made to Bahrein and Goa. The evidence laid by the appellants does not establish a case of impossibility of performance. On the other hand the evidence of Muhammad Younus, a partner of the appellants, shows that the goods could not be sent to India on account of the availability of the new crop of muttar after December 1948. According to this witness the position in regard to Ceylon also was similar. These facts do not, in our view, attract the doctrine of frustration. The breach of contract, if any, by the Government of Sind was waived. Extension was taken by the appellants to perform the contract. The evidence led by the appellants shows only that after extension was obtained they found that it was not possible to send these goods to India and Ceylon. This evidence is not enough to establish that the contract became void on account of frustration. Mr. Bashir Ahmad has drawn our attention to a passage in Halsbury' Laws of England (Third Edition), Volume 8, page

187. It reads as follows :‑ "Frustration may, and commonly does arise through delay, attributable to the fault of neither party, of such character that the fulfilment of the contract, in the only way or ways contemplated and practicable, is so inordinately postponed that fulfilment when the delay is over will not accomplish the only object or objects which both parties to the contract must have known that each of them had in view at the time they made the contract, and for the accomplishment of which object or objects the contract was made. A familiar example of frustration is to be found where impossibility of performance has arisen by virtue of an Act of Parliament, or a Government order made under statutory provisions, or through a British or foreign act of state, such as a declaration of war. Where on the outbreak of war the continued performance of a contract would involve intercourse, with, or benefit to, the enemy or detriment to the interests of Great Britain, the effect of common law of the outbreak of war is to abrogate any subsisting right to further performance (other than the right to the payment of a liquidated sum of money) which will be suspended for the duration of the war. The doctrine of frustration is in all cases subject to the important limitation that the frustration circumstances must arise without fault of either party. The defence of frustration can therefore be defeated by proof of fault, and the burden of proving fault lies upon the party alleging it." It is not the case of the appellants that the performance of the contract became illegal. The only point urged is that the contract became impossible of performance due to delay in issuing export permits. The appellants as prudent businessmen should have anticipated the adverse effect of the new crop on the markets of India and Ceylon. They have failed to establish that the contract became impossible of performance. The learned counsel for the appellants has repeatedly pointed out that the appellants kept the contract alive as they were anxious to perform the same. They, however, could not do so on account of the ban imposed by the Government of India and Ceylon. It is not the case of the appellants that the goods had no other market. These facts, in our view, are not enough to relieve them of their responsibility under the contract. The last argument of Mr. Bashir Ahmad in this connection is that even if it be held that the appellants waived the breach of contract by the Government of Sind and wanted to perform it their right to plead frustration is not lost. In this connection our attention has been drawn to the following passage at page 629 of the Law of Contract by G. H. Treitel "Frustration determines a contract automatically at the time of the frustrating event. If the Court thinks that the contract is frustrated, it is immaterial that the parties think otherwise and for sometime after the event go on behaving as if the contract still existed." "Whatever the consequences of the frustration may be upon the conduct of the parties, its legal effect does not depend on their opinions, or even knowledge, as to the event . . . . . . . . What the parties may say or do is only evidence, and not necessarily weighty evidence, of the view to be taken of the event by informed and experienced minds". Frustration in this respect differs from breach, which enables one party to choose whether to treat the contract as discharged. Frustration determines the contract without any election by either party. It follows that frustration can be invoked by either party, and not only by the party likely to suffer from the frustrating event." We do not see how the above passage is of any assistance to the appellants. We have already found that the facts established in this case do not attract the doctrine of frustration. It is not our view that frustration, if any, was waived. We agree that if frustration is established then the conduct of the party treating the contract to be alive after the event is not very material. The position here is different. The appellants claimed that the Government of Sind failed to perform their obligation under the contract to provide export permits. This certainly gave them the right to determine the contract. They did not do so. On the contrary extension of time was asked and obtained. The events that took place thereafter, on which reliance has been placed to establish frustration, do not point to that conclusion. The plea of frustration, therefore, is not available to the appellants. The only other point that has been raised in this appeal relates to the measure of damages awarded in this case. The trial Court awarded damages on the difference of the market price and the contract price. It came to the conclusion that at the relevant time the market price of low quality of muttar dall was Rs. 25 per bag of 2J maunds. The Government, therefore, suffered a loss of Rs. 2,74,725 on 2,700 tons. The appellate Court agreed with the finding of the trial Court that the respondent‑Government were entitled to the difference in price between the market rate and the contract rate. It over‑ruled the objection of the appellants that as the respondent‑Government, in their plaint, did not claim damages on the basis of market rate but claimed the same on the basis of re‑sale, the suit was not maintainable. It was pointed out that the appellants had not in any way been prejudiced thereby. In calculating the amount of damages, however, the appellate Court found that the trial Court wrongly calculated the same in regard to 2,700 tons though the appellants had taken delivery of 551 tons of muttar dall out of the goods in question and exported the same to India, Ceylon and Bahrein. Calculating the damages, on 2,149 tons, therefore, the decree passed by the trial Court was reduced by Rs. 54,

971. The learned counsel for the appellants has pointed out that the price offered by them was on the basis that the goods were to be exported out of Pakistan. He has also drawn our attention to the fact that the contract clearly provided that any dall damaged by rain would be excluded (See Exh. 13 at page 159 of the paper book). In the present case no evidence has been laid by the respondent‑Government to show as to what was the market price of the goods in question for export on the date when the breach of contract took place. The fact that there was a difference in the price in the market rate for local consumption and for export has been admitted by P. W. 1 Dost Muhammad, who was examined by the respondent‑Government. He has stated in his evidence that the goods in question were sold to the appellants for purposes of export and therefore the Govern ment were able to get higher price than that which could be obtained for them in the open market of the country. The learned Judges of the Letters Patent Bench have noticed this evidence but have discarded the same as D. W. 1 Dad Muhammad a clerk of the Karachi Grain and Seeds Merchants Association, who was examined by the appellants, stated that he was not aware that there was difference in the rate of the muttar dall meant to be sold in the country and meant to be exported out of the country. We have already noticed that the respondent Government claimed damages on the basis of re‑sale. We are unable to accept the finding of the learned Judges of the High Court that the evidence of P. W. 1 with regard to the difference of price between the market rate for local consumption and the market rate for export, was of no consequence. In our view, the question of quantum of damages has not been satisfactorily dealt with by the Courts below. In the result Appeal No. K‑84 of 1964 is allowed and the judgments and decrees of the Courts below are set aside and the case is sent back to the trial Court for determination of the question of quantum of damages on the evidence already on record and on such further evidence that the parties may like to adduce. In view of our findings above, Appeal No. K‑83 of 1964 :is dismissed. There will be no order as to costs. Order accordingly.