P L D 1961 (W (PLP)

Dates of hearing : 17th and 18tk April 1961. The applicants and the opponents are traders in Karachi. They entered into contracts, which are really cross contracts for purchase and repurchase of certain, bales of gunny bags. The contracts which the 9pposite-party entered into extend from 19th May 1956 to 24th May 1956. On 19th May 1956, the opposite-party agreed to purchase 50 bales of `Bardana' at Rs. 154-8-0 per 100 bags, each bale containing 300 bags and paid Rs. 1,250 as advance. On 22nd May 1956, they entered into, another agreement to purchase 25 bales at Rs. 153-12-0 per 100 bags, and paid Rs. 625 as advance. Lastly, on 24th May 1956 the opposite-party entered into a contract to purchase 25 bales at Rs. 153-8-0 per 100 bags, and paid Rs. 625 as advance. The shipment under these contracts was. June shipment from Chitta gong. The cross-contracts were entered into on the 1 I th June 1956, and on the 16th June 1956. The opposite-party- on the 11th June 1956, agreed to sell 25 bales at Rs. 148 per 100 bags ; 25 bales at Rs. 149 per 100 bags, and, 25 bales at Rs. 149 per 100 bags. Under all these three contracts the applicants in all paid Rs. 1,875 as advance. The parties mutually settled on 16th June 1956, the contract in respect of 25 bales at Rs.

150. The applicants in all claim an amount of Rs. 893-12-0 as difference in price between the cross contracts after deducting a' sum of Rs. 625 due to the opposite-party.

2. The learned Small Causes Court Judge held that as the goods did not arrive as per contracts between the parties in June, or for that matter, at any time; the applicants were not entitled to the money that they claim as difference between the two cross contracts of purchase and repurchase.

3. Mr. Jan Muhammad, the learned Advocate ,for ' the applicants contended that the arrival of the goods, in the circum stances of the cross contracts between the parties was not at all material. He contended that in the ease of cross contracts for delivery of exactly similar quantities of goods there is no necessity for either party to tender the goods

4. In cases where there are cross contracts or purchase and repurchase, the intention of the parties is to settle the contract by paying the difference of the contractual price of the two contracts. These are known as settlement contracts. In this connection reliance may be placed on Karupaswami v. Chettabhai & Co. (A I R 1945 Mad. 59). In that case, there were cross contracts for purchase and repurchase of certain quantities of yarn Somayya, J., observed as under :- "In such a case like this there is really no need to tender delivery of the goods by the one or any demand by the other for delivery of the goods on tender of the purchase price. It would be a useless and idle formality to insist upon such demands or tenders in cases of what are really settlement contracts .. In cases where these contracts are entered in to with the very person with whom the prior contracts were already entered into, they are generally known as settlement contracts, i.e., this is with a view to settle the obligation arising under the contracts." Beaumont, C. J., in Ramgopal v. Ramsarup (A I R 1934 Bom. 91 ) observed that in cross contracts where there are two -contracts. one for sale and other for purchase of the same amount of the same class of goods. e.g., one hundred bales of cotton for settlement on the same day, the obvious intention of the parties is that the contracts should not be carried out according to their teems but should be treated as balancing each other.. In such a case, ,generally speaking, the parties intend that the contracts shall be cancelled and that in .lieu of the existing contracts, there shall be a fresh ,contract under which one party has to pay and the other to receive on the due date the difference, and that neither party is to insist on tote original contracts being carried out according to their terms. The Court may readily infer such a fresh contract either from the terms of the instructions for the second contract in referring to an intention to close the first contract, or from the manner in which the contracts have been dealt with in the books e.g., by treating the first two contracts as cancel led, In this connection; reference may also be made to the observation of Rankin, J., In re Uttam Chand (A I R 1920 Cal. 143). He observed: "When a settlement contract is made reselling the goods back again from the original buyer, the intention is not that after the settlement contract the first contract should be discharged the intention is that the two contracts should stand together." Whether the legal effect of cross contracts is, as put in Ramgopal v. Ramsarup by Beaumont, C. J., that anew contract comes into existence or as Rankin, J.; put it that the earlier contract, was still alive, in either case the Court has to allow the difference of price between the two contracts to the party entitled to the same.

5. Mr. Lakhani, the learned Advocate for the opposite-party relied upon a passage from Benjamin on Sale (8th edition) at page

593. The relevant portion runs as under:- "Mercantile contracts of sale of ten contain a stipulation that goods are to be shipped within or during a certain time. It n is then a condition precedent that the goods shall be so shipped, the time of shipment forming part of the description of the goods." The contention of Mr. Lakhani relying on the above 'passage is that it was a condition of the contract that the goods should have been shipped in June, and that not having been. performed, the applicants are not entitled to claim any money from the opposite-party. This contention, to my mind, has no force. The question of shipment in contracts which have been settled mutually by cross contracts does not arise. The question of B shipment would have been important only in cases where the intention of the parties was to deliver the goods. The under standing between the , parties in such cases is not to deliver the goods or receive the delivery, but to pay the difference of money between the two contracts.

6. For the reasons - given above I would allow the revision decree the applicants' suit for Rs. 8OP12-0 with costs of Court. The opposite-party, in this view of the matter, are not entitled to the refund of Rs. 625, as this has been adjusted by the applicants. The parties to bear the costs of the Court below. K. M. A. Petition allowed.