' ABDUL SHAKURUL SALAM, J.-Plaintiff Messrs A. Ismailjee & Sons Limited and defendant Pakistan entered into an agreement of exchange dated 5th May 1962 Exh. P. 21 whereunder the former was to supply 3333 tons of bars, flats and angles of various descriptions to the defendant and the latter was to deliver Tubing's M. S. Vict Grooved 14,85,886 running feet to the former within a period of one year. The defendant delivered to the plaintiff by August, 1962 the following :-
(1) 20,406.10 Rft. Of 4" dia and
(2) 24,330.41 " 6' dia and, then, stopped further delivery.
2. On 29th January, 1964 the plaintiff filed a suit against the defendant for possession of the undelivered goods, specific performance of the contract or for payment of damages. The learned trial Court decreed the suit for damages of Rs, 48,59,795 with 6% simple interest from 1st May, 1963 vide judgment and decree dated 19th January 1976. Defendant has filed this Regular First Appeal.
3. Learned counsel for the appellant has made two submissions. Firstly-, that the agreement Exh. P.
21 was not validly executed and was otherwise collusive. Secondly, that the plaintiff has suffered no loss. The , goods he was to deliver to the defendant, he never parted with. He had on the other hand got 44,737 Rft. Tubings for which the plaintiff had paid nothing.
4. Learned counsel appearing for the defendant have argued that the plaintiff was and has always been willing to perform his part of the contract, i. e. To deliver the bars, etc. And if the defendant did not take the same it is defendant's own fault. The plaintiff was entitled to the contracted tubings from the defendant and for the short delivery, the plaintiff is entitled to damages because if the shortfall had been delivered, the plaintiff would have made profit, for the loss thereof the plaintiff has rightly been awarded damages.
5. After having heard the learned counsel for the parties and perusing the record with their assistance, it is quite clear that the agreement Ex. P. 21 has validly been executed on the sanction of the Preside ^.t. Refer to Exh. P. A. It was carried out to some extent. Until legal proceedings no exception to the agreement was taken nor any collusion of any officials of the defendant itself was asserted. The evidence on record of Mr. F. H. Farooqi, 'Executive Engineer, Deputy Assistant Director Ordnance Services, GHQ, Rawalpindi, D. W-4 is by no means sufficient to prove that the agreement was collusive. He mentioned that some officials dealing with the matter were proceeded against.
But he did not produce any record to substantiate his statement. Of course, not a shred of evidence has been led to prove who on the side of the plaintiff was in collusion. In the cross- examination the witness admitted that before signature, the draft agreement was sent to Ministry of Law who opined that that was "in order". In the Ministry of Defence, Director-General, Defence Purchase and GHQ, have a financial Advisor of the status of Joint Secretary who too had been consulted and had "approved" the agreement. The agreement was acted upon and the defendant not only accepted the bank guarantee from the plaintiff but also delivered its own goods to the plaintiff. During the course of agreement and exchange of numerous letters, the defendant never question the validity of the contract. It was only when the suit was filed that in the written statement objection was taken. It is obvious that it was an afterthought to avoid liability. Even now no claim for the goods delivered was made which would have been made if it had been believed by the defendant that the agreement was unauthorized or collusive. Moreover, the testimony of the defendant's witness Mr. M. S. Khokhar, D. W. 2 shows that the goods were intended to be disposed of but were not being disposed of. The departments of the (1efendant likely to take did not take the goods. There was no open market either. Therefore, when the offer from the plaintiff came along, the same was accepted after having been examined by all concerned and the two Ministries of Law and Defence. There was no invalidity or infirmity involved in the contract Exh. P.
21. Bald allegation to avoid honouring contractual obligations without production of proof neither befits the defendant nor can be countenanced by Courts.
6. The next point to be noticed is that the plaintiff furnished Bank Guarantee to the tune of Rs, 5 lacs in the first instance which was accepted and also offered the goods of his part for inspection and pick up vide Exhs. P. 45,54 to 57,66 but the defendant neither inspected the goods nor lifted the same. Clearly no blemish can be attributed to the plaintiff.
7. The third step in the transaction is that the defendant supplied 44,737 Rft. Tubings to the plaintiff and, then, stopped further supply. This is the admitted position of the parties. Non-supply of the remaining contracted goods by the defendant is clearly in breach of the contract.
8. At this stage, the nature of the contract between the parties may be adverted to. The contract Eah. P. 21 is one of exchange of goods. In 2nd addition of Halsbury's Laws of England Vol. XXIX P. 6 it is stated that "the law relating to contracts of exchange or barter is undeveloped that the Courts seem inclined to follow the maxim of the civil law, peruntatio vicina est emption, and to deal with such contracts as analogous to contracts of sale". Lord Blackburn says in Contract of Sale 1st Edition, Introduction P. 3 that the legal effect of contract of sale and of barter is the same." The principle has been given statutory recognition in the Transfer of Property Act, 1882, section 120 by providing that "Save as otherwise provided in this Chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives, and has the rights and is subject to the liabilities of a buyer as to that which he takes." From this, it follows that when the defendant after supplying some tubings refused to, or, stopped supplying the remaining tubings, it was in breach of contract and the usual legal consequences would follow. '
9. Now, as regards breach of the contract of sale, the first principle is restitution in integrum. In the present case, possession of undelivered goods or specific performance has been refused by the learned trial Court and the party entitled to that, the plaintiff, has not demurred. In the alternative the learned trial Court has allowed damages. The question arises whether the plaintiff is entitled to damages and if so how much ?
10. In the celebrated case of Hadley v. Baxendale (1) Alderson B laid down that :- "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i. e. According to the usual course of things from such breach itself, or such as may reasonably be supposed to have been in contemplation of both the parties, at the time they made the contract, as the 'probable result of the breach of it."
' This principle forms the basis of section 73 of the Contract Act, 1872 wherein it is provided : "When a contract has been broken, the party who suffers by such breach is entitled to receive.
From the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract to be likely to result from the breach of it.
' Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach."
' Now, it is obvious that the first loss which a party suffers from breach of contract is the contract itself or its equivalent in money and further losses would be those which naturally arise therefrom or were known t .The parties.
Lord Blackburn in Livingstone v. Rawyards Coal Co. (2) defined the measure of damages as "that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation". The learned trial Court while assessing damages has calculated the value of the undelivered goods by the (1) (1854) 9 Exch. 341 (2) (1880) 5 App. Cas. 25 defendant at Rs, 81,09,470 and after deducting the price of the goods of the plaintiff which had remained with him at Rs, 32.49,675, allowed damages to the plaintiff at Rs, 48,59,795. There are two errors in the calculation. The first is that the goods of the defendant have been evaluated not as those were to be delivered but as improved and finished by business technique and adding of couplings etc. By the plaintiff. This is not quite right. The goods had to be evaluated as those were at the time of contract for delivery. The improvements and finish had to be done. By the plaintiff for which the latter would obviously pay the expenses. So these expenses have to go. The learned counsel for the plaintiff concede and state that a sum of Rs, 13,40,000 price of Special Couplings may be deducted from the assessed price of Rs, 81,09,470 leaving the balance of (Rs, 81,09,470 -13,40,000) Rs, 67,69,470. But this is not the whole truth. Not only the figure conceded is the price of one item and does not take into account the finishing etc. Costing labour and workmanship but exclusion of the price of one item from the price of the finished goods does not necessarily leave the balance as value of the rest. If an engine of a car is taken out and its price deducted from the value of the car, the balance does not represent the price of the left out materials of the car or of the car. The second error made by the learned trial Court is more fundamental and that is that it omitted to consider that the plaintiff was entitled to loss which "naturally arose in usual course of things". The plaintiff claimed and the learned trial Court allowed damages by calculating the market price of the pipes which were to come into being by using the tubings of the defendant with plaintiff's special "couplings" not in vogue, as those were neither made nor available in Pakistan. See statement of the plaintiff P. W.
11. Possession of these couplings with the plaintiff alone and their use by him was, admittedly, not brought to the notice of the defendant. Therefore, the defendant was not liable for loss on this score under second part of the main provision of section 73 of the Contract Act. The fact that tubings are used for pipes by itself would not impart knowledge of the possession of special "couplings" with the plaintiff, which were not available in Pakistan. Therefore, the plaintiff was not entitled to damages on this account. The plaintiff could claim damages only for loss which "arose in usual course of things". This would require calculation of the value of the undelivered goods as those were at the time of contract. The plaintiff has assessed price of his own goods 3,333 tons of bars, flats angles, etc. At Rs, 32,18,647 roughly Rs, 1,000 per ton which appears to be reasonable. As a business organization, the plaintiff would expect to make some profit out of the bargain and that is quite legitimate. Therefore, the value of the goods of the defendant must be above that figure, though the plaintiff mentioned the same figure in para 32 of the plaint for possession or specific performance. Besides that that was for particular purposes, the plaintiff cannot be pinned to that figure as the defendant cannot be nor would it wish to be, bound by its own written statement para
(11) that the value of the "Tubings far exceeded its original book value," which is Rs, 54,59,516, Even if during the interval of purchase of the goods in 1940s by 1962 the year of contract the value of the goods, i,e, tubings had gone higher that would be off set by non-user and waste by weather conditions, etc. Over more than twenty years. The rubber mines to be attached had been wasted per defendants' own witness D. W. 1 F. H. Farooqi. Therefore, the book value of the goods of the defendant may be taken on the other end. More than that, the defendant would not be any gainer.
Nor can the plaintiff claim any higher in the circumstances of the case and his own stand.
Therefore, the fair and just price of the goods would range between Rs, 32,18,647 and Rs, 54,59,516.
The mean would be about Rs, 43,39,081. This figure would make the bargain for the plaintiff worthwhile as he would get goods in exchange worth more than nearly 1 I lacs and also quite lucrative to the defendant as it would get nearly 1r lacs more than what it itself had rated the goods at Rs, 26,58,580, i,e, 45% of the book value vide Exhs. P. 60, 61 and 62. Both parties would be gainer on their own sides. And why should they not ? The plaintiff was a business organization and the defendant had all the expert advice on its side. Therefore, the fair and just price of the goods of the defendant contracted to be given to the plaintiff is assessed at Rs, 43,39,081. Tubings of dia measuring 11.00,071 Rft. At the rate of Rs, 3.56, and 6' measuring 3.85,816 Rft. At the rate of Rs, 4 per running foot, originally cost Rs, 54,59,516. The assessed cost being Rs, 43,39,081 the rate of 4" tubing would be Rs, 2.8294 and that of 6' tubing would be Rs, 3.1791. The defendant having supplied 4" tubing measuring 20,407 Rft. Worth Rs, 57,73.565 and 6' tubing measuring 24,330 worth Rs, 77,347.503 totaling Rs, 35.087.06, goods worth (Rs, 43,39,081-1,35,087) Rs, 42,03,994 remained to be supplied by the defendant. The plaintiff was entitled to goods worth that much. He having retained goods worth Rs, 32,18,647, would be entitled to Rs, 42,03,99432,18,647 equal to Rs, 9,85,347. This is the approximate loss suffered by the plaintiff. Exactitude in such transactions is not always possible and what is called 'rule of thumb' in. Muhammad Sharif v. Nawab Din and another (1) has been applied to arrive at the figure of the price of the defendant's goods. A word may also be said about what seemingly appears to be anomalous and that is that in the bargain of exchange, the plaintiff had given nothing, already got goods worth about Rs, I lac thirty-six thousand and is getting damages for Rs, 9 lacs eighty-five thousand odd. And that may appear unfair. However, the appearance is deceptive because it does not unravel the reality underneath and that is that there was a contract between the parties and law purports to safeguard mutual promises lest people take law in their own hands to make each other honour his commitment and not lead one another to loss. Under the law as it is if one contracts to pay Rs, 1 lac for goods to be delivered and he is not delivered the goods. He does not pay Rs, 1 lac and can claim damages for non-delivery of the goods if prices go up and he is worse off by the difference. Therefore, it is no use saying as was said by the learned counsel for the defendant that the plaintiff had not parted with his goods, had got some of the defendant and is being allowed damages. The plaintiff had offered his goods, the defendant did not inspect or take those. How could the plaintiff he blamed for the default of the defendant ? The law of the land provides that for breach of contract, a defaulting party must pay the damages. The defendant having broken the contract solemnly entered into after full deliberation and expert advice of all concerned at the highest level on the sanction of the President of Pakistan, it must take the consequences laid down by law. Therefore, the plaintiff is entitled under the law to the damages as calculated above to the tune of Rs, 9,85,347. His suit is decreed to this extent. On this amount he shall have interest at normal rate of 6% p. a. But only from the date of decree of the trial Court in the circumstances of the case. The decree of the learned trial (1) PLD 1957 Lah. 283 Court is thus modified. The appeal is accordingly allowed to the above extent. As the appeal has partly succeeded, the parties shall bear their own costs. The defendant shall satisfy the decree in terms of section 82 of the Civil Procedure Code within 90 days.