ABDUL HAYEE KURESHI, J.-This is an appeal under Clause 10 of the Letters Patent directed against a Judgment and Decree of the learned Single Judge dated 8-2-1965 whereby a suit filed by the appellants (plaintiff's) for recovery of a sum of Z. 37,898-3-3 was dismissed. The suit was for recovery of the price of rice supplied by the plaintiff to the defendant.
2. The case of the appellant (plaintiffs) as set out in the plaint is as follows:-
3. That in the last week of July 1957, the appellant (plaintiffs) and respondent (defendan0 entered into an oral agreement whereby the appellants (plaintiff) were appointed Agents on payment of a commission of 1 per cant. For purchase of Joshi Rice of Sind No. 10 Challi, 1956/57 Crop. The case of the appellants was that the respondents engaged them to purchase 25 wagon loads of rice of the aforesaid quality and supplied the same to the respondents. Each wagon was to contain 200 bags of rice of the nett weight of 2-- maunds per bag.
The supply as per the assertion of the appellant was to be as per the prevailing market rates. The appellant supplied 24 wagons containing 4,800 bags of rice of the contracted quality and the total price payable by the respondents was Rs. 2.22,715-14-3. This amount also included the expenses incurred on the purchase and the commission payable to the appellants. The price of rice together with the expenses and commission was payable by the respondents to the appellants on presentation of the railway receipts and invoices covering the relevant supply. Out of the amount due the appellant had received a sum of Rs. 1,85,115, on various dates. This amount also included a sum of Rs. 50,000.00 paid by respondents to appellants on July 13, 1957 as an amount "on account".
The appellant, therefore, claimed a balance of Rs. 37,898-3-3 which the respondents had refused to pay.
4. In the plaint filed by the appellants it was stated that the respondents with a view to avoid payment to the appellants had alleged that the rice supplied by the appellant to respondents was meant for supply to the Government of Pakistan to the knowledge of the appellants. It was further stated that the respondents had set-up a plea on ground of rice being different from the rice specified to be sold and for that reason the respondents had raised this false defence. It was, however, stated in the plaint that every consignment of rice was examined and inspected by the representatives of the respondents who were available for that purpose and supply had been made only after the goods had been examined and approved by respondent's representatives.
5. The respondents in their written statement which is a lengthy document stated that the appellants were not appointed' commission agents but were the principals and were to get no commission because they were to be paid at the prevalent market rate. It was further stated that in July 1957, the Government of Pakistan had invited tenders for supply of rice and both the parties agreed that the respondents should enter into a contract for supply of 1,000 tons of rice viz., 11,000 bags containing 21 maunds per bag. It was further stated by the respondents that the appellants were to deliver the rice in strict accordance with the specifications and the terms and conditions prescribed by the Government of Pakistan, and in case the goods supplied were not strictly in accordance with the specifications, all the losses and charges including charges for analysis of the goods would be borne by the appellate. It was further stated that a sum of Rs. 5,000.00 was paid in advance and further payments were to be made by the respondents to the appellants at the discretion of the respondents, and when payments in respect of the goods were made by Government. It was further stated that the appellants had to deliver 1,000 tons but had delivered only about 440 tons. With regard to the quality of rice supplied, it was stated in the written statement that the rice was over-broken, over-cooked, over-red, over-dark, over-wet, over-milled, damaged and far inferior to the quality specified in the contract that the respondents had entered into with the Government. It was further alleged that the contents of the bags were found to be less in weight than the weight which was shown fn the Railway Receipts. The actual weight of the al rice received by the respondents was 11,827 maunds and 29 seers and out of this 55 maunds was found to be dust. It was further stated that the Government had rejected the entire supplies and had decided not to accept the rice at the standard agreed rate of Rs. 53-8-0 per bag. It was further stated in the written statement that as the Government had not finally decided to accept or reject the whole or part of rice supplied by the appellants, no part of the amount claimed by the appellant was payable. It was however stated that the appellant had demanded payment of Rs.
37,898-3-0 from the respondents.
6. On the pleadings, the following issues were framed:-
(1) What were the terms of the contract between the plaintiffs and the defendants?
(2) Was there any failure on the part of the plaintiffs to deliver rice of the contracted quantity and the contracted quality, within the contracted time, and what is the effect thereof?
(3) Are the plaintiffs liable for the losses, charges, shortages, allowances, deductions, interest and loss of profit, as claimed by the defendants by reason of the plaintiff's failure to perform their part of the contract?
(4) Were the amounts due to or by the plaintiffs by or to defendants on account of the contract ascertainable at the date of the suit, and if not, what is the effect thereof?
(5) What amount if any, is due to the plaintiffs from the defendants in respect of the contract in suit?
(6) Have the plaintiffs 'any cause of action against the defendants?
(7) Are the plaintiffs entitled to any relief and if so what?
(8) General."
7. The learned Single Judge while dealing with the aforesaid Issues, first considered Issues Nos. 1 and 2 together and decided both these issues in favour of the respondent and held that the appellant was guilty of breach of contract both in regard to quantity as well as Quality of the goods that he had to supply. Issues 3 to 8 were taken for consideration together and fn regard to these issues, the learned Single Judge reasoned that since at the time of filing of this suit the question of acceptance or rejection of the goods was still under the consideration of the Government and further that because the suit was not one for accounts, but for the price of the goods delivered, it was not open to consider the case in respect of reduction in value of goods as contemplated by section 50 of the Sale of Goods Act. In short the learned Single Judge held the view that since the suit was one under section 55 of the Sale of Goods Act for recovery of the price, the Court could not enter into the question regarding deminution or extinction of the price. In the result the suit was dismissed.
8. Regard being had to the nature of Issues 1 and 2, I am of the view that these two issues are separate issues and I v would, therefore, consider Issue No. 1 independently of Issue a No. 2. Issue No. 1 relates to the terms of the contract between the appellants and the respondents. In this case there was no contract between the parties in writing. The parties in their evidence have set up divergent case inasmuch as the case of the appellant is that they were acting only as commission agents for purchase of 25 wagons of rice and they claimed. The appellants' case further is that the value of goods together with actual expenses incurred for procuring and despatching the goods together with the commission of 1 per cent was payable by the respondent to appellant on presentation of railway receipts and invoices. It is further their case that they were to supply Joshi rice of the quality No. 10 Challi of 1956/57 crop. The case of the respondents is that the appellant was not a com--mission agent, but was a principal and was to supply rice at the market price.
They further stated that the appellants had tempted the respondents to enter into this contract with the Government and had further undertaken to supply 1,000 tons of rice which was to be of the specification laid down by the Government. In regard to mode of payment, the case of the; respondents is that payment was to be made by the respondents at their discretion after the acceptance of goods by the Govern--ment; and payment for the same by the Government.
9. The learned Single Judge held that this was a case where the appellant had undertaken to supply the goods In accordance with the Government specifications and such under--taking amounted to a warranty as contemplated by section 16 of the Sale of Goods Act. The learned Single Judge further held that the contract was for supply of 1,000 tons. With regard to the mode of payment, the learned Single Judge has not given any clear-cut finding presumably because he had dismissed -the suit of the appellant and there was no counter-claim or separate suit by the respondents for damages or any other relief.
10. With regard to the quantity of rice that had to be supplied by the appellants to the respondents, there is no doubt that respondent had by his contract with the Government undertaken 2o supply 1,000 tons. But the question is whether the appellant had agreed to supply 1,000 tons. In the evidence of Muhammad Ahmad (P. W. 1), a partner of the appellants firm, it is stated that initially he had only agreed to supply 25 wagons of rice i.e. 5000 bags. He has further stated that he had made a commitment with another firm by name William Sons for supply of a huge quantity of rice and, therefore, owing to his Inability he had agreed to supply only 25 wagons. There is however evidence on the record that the respondent had made purchases from and through other merchants of Larkana District. Moreover, it is admitted by Abdul Shakoor (D. W. 1) that right from 8th August 1957 till 5th November 1957 the respondent did not express in writing that the appellants had agreed to supply 1,000 tons of rice. The same witness for the defendants/respondent who as per his own showing had an arrangement with Abdul Sattar, the main partner of respondents, has admitted that between the 8th of August 1957 and 23rd of August 1957 the respondents had contacted two other dealers of rice and they did obtain rice from them and the supply by those two merchants was almost simultaneous with the supply by the appellants. Moreover, Exhs. 13 and 54-A show a quantity of rice much larger than the quantity of rice supplied by the appellants and these two documents also clearly show that be-4 sides the rice supplied by the appellants, the respondents had been purchasing rice from other sources also. Exh. 13 is the analysis result in respect of 37 wagons of rice supplied by the respondents to Government and Exh. 54-A Is again another letter from the Government addressed to the godown keepers of the Government asking them to return 10000 maunds viz. About 20 wagons of rice to the respondents. All these circum-- stances, clearly show that besides the appellants some other sources were also supplying rice to the respondents. Since the respondents had never objected In writing regarding any short supply by the appellants, I would hold that the quantity contracted to be supplied by appellants was not 1000 tons but 25 wagons of rice viz. 5000 bags.
11. With regard to quality of rice to be supplied by the appellants to respondents, the case of the two parties is divergent. However, the circumstances of the case provide sufficient material for coming to the correct conclusions. It is admitted case that the respondents were purchasing rice for supply to Government and it is further admitted that appellants were dealing in rice. In fact the evidence discloses that Abdul Sattar (D. W. 2), the main partner of respondents firm had recently migrated from India and wanted to set up profitable business. The case of the respondents is that they had specifically asked the appellants to supply goods which would conform to the specifications laid down by the Government and the appellants had agreed to do so. The quantity of rice that was being purchased by the respondents from the appellants was so large that the respondents must have informed the appellants in regard to the supply of rice in question to the Government. The respondent in order to safeguard his interest vis-a-vis the quality of rice must have informed the appellant accordingly and could not have made purchases from the appellant if the latter had not agreed to supply goods in accordance with the requirements of the respondents in respect of quality of goods. Although Muhammad Ahmad (P. W. 1) has stated in his evidence that the appellant had made no such contract with the respondent in regard to quality of goods I have no hesitation in saying that to that extent his evidence is not reliable. He admits that he knew that supply was for the Government. In ordinary course of events also a supplier to the Government would always inform the person from whom he was buying about the quality of goods required by the Government; and would rot agree to purchase from the seller unless the latter undertakes to supply in accordance with the requirements of the buyer.
"I was aware that the defendant desired to purchase 25 wagons of Joshi rice from the plaintiff for supplying it to the Government because there can be no other purchaser of that quantity of rice. I, however, did mot know as to what was the specifications of the Government." He has also stated that from 15-8-1957 to 10-9-1957 the appellant's firm had despatched 24 wagons to the Director of Procurement of Food. The evidence discloses that the Director of Procurement of Food was the consignee as per agreement of the respondent with the Government. P. W. Haji Abdul Sattar has in examination-in---chief stated as follows:- "It Is true that the plaintiffs had informed us that all the rice was to be consigned to Director of Food Procurement, Government of Pakistan for the purpose of the Government. I was not told by the plaintiffs that this rice was meant for the Government, and, therefore, it must be of the quality which should be acceptable by the Government."
He went on further to say as follows:- "I am supplying rice of this quality to the Government' even at present. I knew the quality of the rice and its specifications which are acceptable to the Government. It is not true that the plaintiff had told me to send the rice of whatever quality that was available, no matter whether it was of the specifications acceptable to the Government (or not)."
(The words in brackets are mine).
Even P. W. 3 Abdul Rahman, an employee of the plaintiff firm has stated that the Railway receipts were prepared in the name of the Director of Food Procurement because the permit was also in his name.
I, therefore, have no hesitation in holding that the appellant had agreed to deliver goods of such quality as would conform to the requirements of the respondents who had to supply the goods to the Government. The specifications in regard to the goods have been detailed in Exh. 28 which is a letter from the Government of Pakistan to the respondents intimating the respondents about the quality of goods that were to be delivered by the respondents to the Government.
12. With regard to the mode of payment, the case of the appellants is that the respondent was to pay the price at the pre--valent market rate together with the expenses and commission on delivery of railway receipts and invoices. On the other band, the case of the respondents is that initially an amount of Rs. 50,000.00 was paid "on account" and the balance was payable at the discre--petition of the respondents and in any case after acceptance of the goods by the Government and realisation of the price by the respondents. 7 he admitted facts are that in July and August 1957, the respondents had in addition to Rs. 50;000.00 paid initially a-- further sum of Rs. 1,35,150.00 to the appellants. Moreover. D. W. Abdul Sattar has also stated in his evidence that he had the full amount and had only withheld the balance of Rs. 37,000.00 (roughly equal to the amount in the suit) because he expected the Government to deduct some money on account of shortage in supply and inferior quality of the goods. Moreover, the things speak for themselves and the admitted position is that out of total amount of Rs. 2,22,715-14-3, an amount of Rs. 1,85,115 had been paid by respondents to the appellants in the months of July, August and September 1957, even though the question of acceptance of the goods was decided by the Government only in May 1958. These facts clearly show that the amount in respect of supply was to be paid as soon as the supply was made or within a short time after the presentation of railway receipts and invoices. I, therefore, hold that it was a condition of the contract that the price of rice supplied by the appellants to respondents was payable after each consignment was received by the respondents.
Even otherwise in the circumstances of the case I cannot persuade myself to believe the case the respondent has set up in this regard because huge quantity was to be supplied. In the result my finding on this issue is that the contract was for supply of 25 wagons of rice and the quality to be supplied was in accordance with the specifica--tions laid down by the Government and the respondents were to pay the appellants on delivery and submission of railway receipts and invoices.
13. With regard to the second issue, the learned Single Judge has held that the appellants had failed to supply the goods both in regard to quantity as well as quality.
14. While dealing with issue No. 1, I have held that the contract was for supply of 25 wagons and not for 1000 tons as alleged by the respondents. Admittedly 24 wagons of rice were supplied by the appellant to the respondent and with regard to the remaining one wagon, the evi--dence of the appellants clearly is that representatives of the respondents rejected the goods before the same were transported to Karachi for delivery to respondents. In any case it appears that the case of the respondents with regard to the quantity to be supplied was set up on the basis that the contract was for supply of 1,000 tons and on behalf of the respondents there is a paucity of evidence in regard to circumstances regarding short supply of one wagon. No serious argument was raised by the learned Advocate in regard to this short supply of one wagon. It will, therefore, keep this aspect of the case out of consideration for the purpose of giving a finding on this issue.
15. Coming then to the quality of rice that was supplied, the evidence clearly discloses that out of 24 wagons of rice supplied by the appellants to the respondents 10 were rejected by the Government and returned to the respondents. Alongwith the written statement the respondents had filed an annexure marked as Schedule "A" which showed 24 items of supply, each item relating to one wagon. This annexure gives the number of the wagons together with number of railway receipt in regard to the consignment and other particulars in regard to weight of rice in each of the wagons. Abdul Shakoor (D. W. 1) has in his evidence produced an analysis report (Exh. 31) in regard to the analysis that were carried on by the Government with respect to the rice supplied by the respondents to the Government. This analysis report also gives the number of the wagon, weight of rice and analysis results. This Exh. Shows that 14 wagons of rice supplied by the respondents to the Government out of total quantity of rice supplied by the appellants to respondents were accepted.
I have compared and checked the numbers of the wagons in Exh. 31 in juxtaposition with the list submitted by respondents along with the written statement, which has been referred to above, and I also find that 14 wagons of rice were accepted by the Government. Along with this evidence I have also considered Exh. 54-A produced by S. M. Ahmed, a Superintendent in the Ministry of Food, Govern--ment of Pakistan. This Exh. Is a letter dated 8th March 1958, written by the Director, Procurement and Distribution and is addressed to M/s. Jahana Sons directing the latter to return 10000 maunds of rice to the respondents. These documents therefore, conclusively show that out of 24 wagons of rice supplied by appellants to respondents, only 14 were accepted by the Government whereas 10 were rejected. The next circumstance for consideration is whether the 10 wagons of rice in question were rejected on account of their non-conformity with the specifica-- tions laid down by the Government in regard to supply. There does not appear to be any doubt that the 10 wagons of rice which were rejected by the Government were inferior in quality to the rice that the Government had to procure in this case.
16. Moreover, some telegrams were exchanged between the parties in regard to the supply and these telegrams have been brought on record as Exhs. 7 to 18. These documents were admitted by the parties. The first telegram in point of time is dated 7-9-1957 and was sent by the respondents to the appellants. This telegram reads as under:-- "Your supply Joshi Rice 1400 Larkana 600 Kamber A.I 200 Badeh over-broken, over-cooked, over- dark, over-red, over-- wet and most inferior. All rejected. Shortage follows. Please Note.
International Food Grains."
This telegram was followed by other telegrams which are Exhs. 10, 11, 13, 14 and 16 and in each one of these telegrams the respondents made a grievance in regard to the quality of rice and stated the fact that the rice had been rejected by the Government. The appellants also made replies to the telegrams of the respondents and these replies have been brought on record as Exhs. A/l, 9. 12, 15 and 17. The first telegram Exh. A/1 is dated 8-9-1957 and is in reply to the telegram Exh.7, the text whereof has been reproduced above. This telegram reads as follows :-- " Received your telegram, total consignment Builty cut here consignment fully examined checked; weighed and delivery taken here by your Manager Karimbhai and Rashid. Due to end of season everywhere rice of such quality."
Even the other telegrams by the appellant to the respondents are couched in similar terms. A perusal of these telegraphic replies by the appellant to the respondent discloses that the appellants did not repel the grievance of the respondents in regard to quality of goods but set up a case to the effect that the goods. Have been inspected, checked and accepted by the representatives of the respondents and further that owing to the time of supply being the end of the season, good quality rice as may conform with Government specifications was not available anywhere. On a perusal of this correspondence in the form of telegrams that passed between the parties in September 1957 viz. The period when supply was proceeding, I am left in no doubt that the goods supplied were inferior to the goods that the respondents had agreed to buy. Even at the time of arguments, Mr. Fakhruddin Ibrahim, the learned Advocate for the appellants did not seriously challenge that the goods were not of a quality as would conform to the Government specifications, but the case that the learned Advocate attempted to set up before us was that the appellants bad not contracted to supply goods which may be acceptable to Government and alternatively the respondent by sending his representatives to Larkana for the purpose of examining the goods before supply had not relied on the seller's skill or judgment as contemplated by section 16(1) of the Sale of Goods Act.
17. With regard to the actual terms of the contract, I have dealt with this aspect of the case above and held that the appellants had agreed to supply goods which were to be in conformity with the Government specifications. The next contention of the learned Advocate for the appellants with regard to reliance on skill and judgment of appellant would now require examination in the light of the provisions of section 16, Sale of Goods Act.
18. Section 16(l) of Sale of Goods Act reads as follows :- "Where the buyer, expressly or by implication makes known: to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment and the goods are of a description which it is the course of the seller's business to supply (whether he Is the manufacturer or producer or not), there is as implied condition that the goods shall be reasonably fit for such purpose. Provid--ed that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose."
On facts it appears to be fairly clear to me that some representatives of the respondents were present in Larkana District at the time when the supply of goods was proceeding. The names of two persons are mentioned in telegram Exh. A/1 as Karimbhai and Rashid. These two persons have not been examined by any party. While the case of the appellants is that these representatives of the respondents had inspected, checked and examined the rice, the case of the respondents is that these persons had been sent to Larkana only for the purpose of obtaining transit permits for rice and for supervision of supply so that the supply could be made by the respondents to the Government within time. There is, however, no document in possessi3n of the appellants to show that these persons had actually inspected the goods and accepted the same. Moreover, there is nothing on the record to indicate whether these persons were qualified or found suitable to perform the function of selection of rice. The evidence of plaintiff also shows that these persons came only after rice had been pur--chased by the appellant. It must be remembered that the respondent bad contracted to supply 1000 tons of rice and the work of transportation of this rice from various railway stations In Larkana District to Karachi and the obtaining of permits and railway wagons was enormous.
19. Under section 16, the existence of a warranty or condition is deemed to exist on the following conditions being fulfilled :-
(i) That the buyer should expressly or by implication make known to the seller the particular purpose for which the goods are required,
(ii) that the disclosure of particular purpose of the goods should be made in a manner as would show that the buyer relies on the seller's skill or judgment; and
(iii) that the goods are of a description which it is in the coarse of seller's business to supply.
I have already said that the respondents did make known to the appellants the particular purpose for which the goods were being purchased by them. It is also admitted case that the appellants are dealers In Foodgrains and procure huge quantity of rice for various parties and for their own trade. It is also in evidence that the appellants own a Husking Mill. The only question is whether the respondents had relied on the appellants' skill or judgment in the matter of supply of rice.
20. The Rule of Caveat Emptor applies only when a buyer buys a specific item. But when he places an order for supply and trusts the judgment of the supplier, this rule does not apply. In this case it has not been established that the representative of the respondents available at Larkana had inspected the goods. Besides, the evidence of D. Ws. Abdul Shakoor and Abdul Sattar clearly establishes that the firm of the respondents had never dealt with foodgrains. In fact the case set up by the respondent is that he was tempted by the appellant to enter into a contract with the Government for supply of rice and it is further said in the respondent's evidence that had it not been for the assurance by the appellants, they would not have entered into this contract with the Government.
21. Whether a buyer has relied on the skill or judgment of the seller is a question of fact. Such reliance need not be exclusive of all reliance on anything else but it should be a substantial and effective inducement which should lead the buyer to agree to purchase. The mere fact that a buyer may have deputed a person to inspect the goods before delivery will not absolve the seller of responsibility to supply goods in accordance with the warranty. There may be cases where a buyer partly relies on his own knowledge or common sense or even the advice' of his own experts but if it is shown that the buyer substantially relies on skill and judgment of the seller, the breach of warranty would be actionable. The effect of this argument is heightened in cases where a known and definite article is ordered for accomplishment of a definite purpose and in such a case the duty that devolves on the seller is of a higher magnitude than in a case where only known and definite article is ordered without specifying the purpose for which the article would be employed.
In this case it was not merely a supply of No. 19 Challi rice as is stated by the appellant but the respondent has established that he had made known to the appellant the purpose for which the rice was being purchased. In the context of the circumstances I would venture to state that whereas any variety of rice may be fit for eating, the rice that the respondents were to buy was to be not, merely such as would be fit for eating but such as would be acceptable to Government by being in conformity with the specifications. In this case the essence of the contract was not mere supply of an article but it was that the article shall accomplish a particular purpose.
Moreover, the evidence in this case discloses that 14 wagons out of 24 wagons contained rice of quality which was accepted by the Government (though at reduced rate) and the remaining were rejected. That a portion of the rice was such as was not in conformity with the specifications was known to the appellants, and it is for that reason that the appellant in his telegram Exh. 1/A had stated that owing to the end of season the quality of rice available was such as was being supplied. This clearly means that it was to the knowledge of the appellant that the rice being supplied by him was inferior in quality to the rice that he had contracted to supply. In the result. I hold that on account of breach of warranty in this case, the appellants are guilty of a breach of the contract.
22. The remaining issues may be conveniently taken together. The point that now requires consideration is whether the-- appellants are entitled to the balance of the purchase price or any part of it. The learned Advocate for the appellants has, strongly relied on the provisions of sections 42 and 59 of the Sale of Goods Act. His contention is that the respondent should be deemed to have accepted the goods because he has not returned the same and also sold the same without intimating the appellant. He contends that the appellants supplied the goods and the respondents accepted the same and acted in relation to the goods in a manner which was inconsistent with the ownership of the appellant who was a seller. 1n that case it is further contended by the learned Advocate that the only remedy available with the respondents was to set up a case for diminution or extinction of the price of the goods. He states that admittedly the goods were sold by the appellants and purchased by the respondents at the rate of about Rs. 42 per bag and when this fact is taken into consideration along with the fact of the respondent having obtained a higher price than what he paid; he had made a benefit in the bargain and was as such not entitled to relief by way of diminution or extinction of price.
On the other hand. Mr. Tayyabji for the respondents has stated that the plaintiff (appellant) was not entitled to the full price that he has claimed because under section 55 of the Sale of Goods Act, the buyer will become liable only if the refusal to pay is wrongful and a violation of the terms of the contract is proved. He contends that section 55 of the Sale of Goods Act has to be read in conjunction with section 9 of the said Act and if It is found that the seller is not entitled to the price that was originally specified in the contract, he should only be made to pay a reasonable price for the goods. It is further contended by the learned Advocate for the respondent that in spite of the fact that the respondent has not filed a counter-claim or a cross-Suit, he would still be entitled to diminution in the price and damages for breach of contract.
23. At this stage I would briefly refer to the facts that have been proved on record. The price payable under the contract by the respondents to the appellants was market price which was about Rs.42 per bag of rice. It is further established out record that tile Government was to purchase rice at the rate of Rs. 53-8-0 per bag. It is also proved that 14 wagons of rice which were accepted by the Government were also not found to, be in full conformity with the specifications and, therefore, the Government paid a reduced rate of Rs. 48-8-0 per bag. It is also established on the record that the 10 wagons of rice rejected by the Government were sold by the respondents at the rate of Rs. 45 per bag. The evidence with regard to lesser price having been obtained by the respondent has been furnished by tile evidence tendered on behalf of the respondent and the same has not been seriously challenged by cross-examination. Even at the time of hearing, the learned Advocate for the appellants did not challenge the authenticity of these assertions of the respondent. I would say that some of the facts were not stated by the respon--dents' witnesses in their examination-in-chief but have been brought out in cross-examination on behalf of the appellants. Although D. W. Abdul Shakoor had not stated in his examina--petition-in-chief that the Government had paid a reduced rate. It was brought out in cross-examination by the Advocate for the appellants that the Government had reduced the rate by Rs. 5 per bag. D. Ws. S. M. Ahmad and A.I Hamid Khan who are both employees of Ministry of Food, Government of Pakistan have also deposed that the Government paid a reduced rate. That the rejected wagons were sold by respondents at the rate of Rs. 45 per bag has been proved by the evidence of defendants' witnesses. I may, however, mention that of the reduction of Rs. 5 per bag made by the Government in respect of such goods as were accepted by Government, a sum of Rs. 2-8-0 per bag would in any case have been reduced on account of administrative charges. This is in the evidence of D. W.
Abdul Shakoor. These charges had been in any case to be paid by the respondents to the Government so that in fact the Government had to pay Rs. 51 per bag and not Rs. 53-8-0 for bag as Rs. 2-8-0 was the administrative charge. These facts are fairly clear on the record and there does not appear to be much of a controversy.
24. Coming now to the cumulative effect of sections 42 and 59 of Sale of Goods Act, it would be profitable to reproduce these provisions of law :- "Section 42 The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without Intimating to the seller that be has rejected them.
Section 59
(1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods ; but he may
(a) set up against the seller the breach of warranty in diminu--petition or extinction of the price ; or
(b) sue the seller for damages for breach of warranty.
(2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if ne has suffered further damage."
Reading these two provisions of the Sale of Goods Act to--gether, it would appear that when a buyer Intimates to the seller that he has accepted the goods or when after delivery of the goods the buyer does an act in relation to the goods in a manner which is inconsistent with the ownership of the seller, he shall be deemed to have accepted the same. Under section 59 of the Sale of Goods Act, a buyer again has a right to elect to treat a breach of condition as a breach of warranty and is such a case the buyer would not be entitled to reject the goods but he may either set up against the seller a defence based on breach of warranty for the purpose of diminution or extinction of the price ; or in the alternative he should sue the seller for damages for breach of warranty. It would thus appear that merely because a buyer does not return the goods and deals with the same as if the goods belong to him, he would not be precluded from setting up defence for reduction or extinction of the price in case he can show that the goods were not in accor--dance with the warranty. In the case of Messrs Yousuf and Razak v. Abdullah (PLD 1957 Kar. 747), Mr. Justice Waheeduddin (now a Judge of Supreme Court) with whom Mr. Justice Constantine agreed held that the respondent by selling the goods 9n dispute in his own name and by receiving the price accepted the goods within the meaning of section 42 of the Sale of Goods Act. In the present case there appears to be no manner of doubt that the respondent by resale of the goods acted in a manner in which an owner may act and, therefore, he shall be deemed to have accepted the goods. In fact in all cases of breach of warranty or such case where a seller elects to treat breach of condition as breach of warranty he has no right to reject the goods.
25. The question that then arises is as to what are the rights of the buyer in relation to an action brought by the seller for recovery of price. As section 59 of Sale of Goods Act lays down, a buyer can file a suit against the seller for damages on account of inferiority of the material supplied, but, it is also provided that the buyer may not exercise such a right and may choose to wait till such time that the seller files a suit for recovery of the price and in that case he may be able to successfully plead that the seller is not entitled to the price which is fixed in the contract under section 9(1) of the Sale of Goods Act but only to a dimini--shed price. Since the Sale of Goods Act in our Country 1s based on the Sale of Goods Act of England, it would be profitable to consider some English cases on this point. It appears that before the decision in the case of Mondel v. Steel (58 R R 890), the law that prevailed in England was that where a chattel was bought for an agreed price, the plaintiff was allowed to recover the stipulated sum, leaving the defendants to a cross-action for breach o warranty. But after the decision in Mondel v. Steel and Basten v. Butter ((1806) 7 East 479a different practice began to prevail and has since been followed ; and the defendant is now permitted to show that the chattel by reason of non-compliance with warranty was diminished in value. The rule, therefore, is that it is competent for the defendant simply to defend himself by showing how much less the subject-matter of the action was worth by reason of breach of contract ; and to that extent he was capable of obtaining an abatement of price on that account.
The same principle was also recognized and acted upon in the case of Messrs Yousuf & Razzaq v.
Abdullah and on account of breach of warranty as to merchantable quality of the goods, the price awarded to the plaintiff was reduced.
26. Mr. Tayyabji while agreeing with this principle however argued that this was a case of total extinction of price and not mere diminution. He strongly relied on the case of Poulton v. Lattimore (9 B & C 259) and pleaded that because the goods supplied were not of the quality warranted, the appellants were not entitled to any re--lief. I am afraid the facts in Poulton's case were entirely different. In that case the suit was for recovery of price of seed which was warranted to be good, new growing seed, but proved to be utterly worthless. Under such circumstances, the defendant without returning the seed set up a defence of total extinction of price and succeeded. This case is clearly distinguishable from the facts of the present case where admittedly the respondents were able to sell rice at the rate of Rs. 45 per bag. The other cases to which reference was made 9n this context were Fielder v. Starkin ((1788)1 H Bl. 17) and Buchanan v. Parnshaw ((1788) 2 T R 745). Both these cases relate to warranties attached to sale of hor3es and it was found in each one of these cases that the animal sold was worthless and unsound. These cases therefore do not help Mr. Tayyabji.
27. The point however is that if the respondents are not entitled to extinction of the price. Are they justified in raising the defence for diminution of the price. I have given above the facts of the transaction. There is no doubt whatsoever that the appel--lants had agreed to supply such quality of rice as would conform to the Government specifications. There is also no reason to doubt that 10 out of 24 wagons were rejected by the Government for reason of the same being in non- conformity with the specifications. In fact D. Ws. S. M. Ahmed and A.I Hamid Khan have not been cross-examined on the point of goods not being up to specifications. However, the telegraphic correspondence between the parties at the time of supply of goods also Indicates that the appellants at the time of supply of goods knew that the same were not in accordance with the warranty. The mere fact of acceptance of the goods by respondents is also no defence to the claim of the respondents for diminution of price. The only question that remains for consideration is the extent to which the price of the rice supplied by appellants to respondents should be reduced.
28. For the reason that section 59 of the Sale of Goods Act does not lay down any principle for determination of the reduction in price as section 53 of the English Act lays down, therefore, in such cases re-course has to be had to the general provisions of section 73 of the Contract Act. Section 73 of the Con--tract Act provides that the party guilty of breach of contract has to compensate for any loss or damage naturally arising in the usual course of things from such breach or which the parties knew to be likely to result from the breach of it.
29. In this case I have already held that the appellant knew that the respondent was purchasing rice for sub-buyers. Even the quantity of goods that the respondents were purchasing clearly indicated that it was for sub-buyers. Moreover, as far as this aspect of the case is concerned it has not been seriously challenged. It has also not been challenged by the appellants that 10 out of 24 wagons were rejected and that the 14 wagons accepted by the Government were paid for at a reduced rate and the 10 wagons rejected by the Government were sold by the respondents at the rate of Rs. 45.00 per bag.
30. The learned Single Judge had answered the first two issues in favour of the respondents by holding that the appellants were guilty of breach of contract both in respect of quantity and quality of goods. I have however held that the appellants were guilty only fn respect of quality of goods and not the quantity. The learned Single Judge while discussing the remaining issues in this case did not give any relief to the appellants as he was of the view that the suit was not one for accounts but for recovery of the price of goods and therefore the learned Single Judge held the view that it was not open to him to determine a fair and reason--able price as that would involve going into accounts. I would with all respect disagree with the learned Single Judge on this point.
This suit was not one for accounts inasmuch as it was not the case of any of the two parties that one of them was the accounting party qua the other. In the written statement the following grievances were made by the respondents :-
(1) That the goods were of an inferior quality and a bulk thereof was therefore rejected by the Government.
(2) That the actual weight of the goods was 11,827 maunds and 29 seers and not 12,000 maunds.
(3) That the respondents had suffered damages on account of the undertakings they had entered into with the Government.
None of these defences raised in the written statement pre--sents a case for accounts. In a suit under section 55 of the Sale of Goods Act, the buyer has a statutory right to plead diminu--petition or extinction of price on account of breach of warranty. This right is conferred as a general defence and cannot be con--sidered even to be a set-off or cross-claim. It is merely an avail--able mode to the suffering buyer to get relief to the extent of his loss. Clauses (a) and (b) of section 59(1) of the Sale of Goods Act clearly show that whereas clause (a) contemplates the setting up of a defence against the seller, clause (b) contemplates the filing of a separate suit for damages. This shows that in cases based on breach of warranty, tyro remedies are available to the buyer; one by way of filing a suit for damages and the other by pleading for reduction in the agreed price. In fact subsection (2) of section 59 makes the position still clear by stating as follows :- "The fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damages."
This subsection clearly indicates that two separate remedies are available to the buyer ; one by way of filing of a suit for damages and another by way of raising a plea for diminution or extinction of the price. These remedies are available when the buyer has accepted the goods but of course in proper cases the buyer can reject the goods if the same do not comply with the terms of the contracts. I am, therefore, of the view that the defence raised by the respondents can be legally considered in so far as the same relates to diminution of price of goods.
31. The only question that then remains for consideration is the extent to which the price of the goods may be diminished as contemplated by section 59 of the Sale of Goods Act. While the English law viz. Sale of Goods Act, 1893 has a provision enacted in section 53 of that Act for assessm ent of such diminu--petition, no parallel provision is contained In the Sale of Goods Act as applicable in Pakistan. In Pakistan the law governing such cases is contained in section 73 of the Contract Act. Their Lordships of the Supreme Court in the case of Province of West Pakistan v. Saaz & Co. Have held that section 73 of the Contract Act embodied the same principles as those of section 53 of the English Sale of Goods Act on the question of measure of damages.
Section 53(3) of the English Act deals with the measure of damages in cases of breach of warranty of quality and may be profitably reproduced. It reads as under "(3) In the case of breach of warranty of quality, such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty."
On the other hand section 73 of the Contract Act lays down as follows :- "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."
On a fair reading of section 73 of the Contract Act, it would appear that the measure of damages will ordinarily be such as naturally arises in the usual course of things on account of breach of contract, but there may be cases where one party knows the loss that the other party will suffer in case of non-performance of the contract. No doubt the normal rule in assessing damages is to find out the loss occasioned on account of actual fall in the market price. This was the rule laid down in the case of Haley v. Baxendale (96 R R 742). In that case the defendant did not know that the plaintiff's Mill was stopped for want of part of machinery which they were to supply and therefore they were not liable for loss of profit. The reasoning is absolutely acceptable because the loss suffered by the plaintiff was clearly too remote, but there may be cases where one party fails to supply goods to the other party and that first party had the knowledge of the otter party being under obligation to supply the said goody to a third party. In such cases the party that had undertaken to supply Is liable both for ordinary damages arising as a difference between the market price and the contractual price if any, and also for the loss of profit of the buyer. To put it more clearly will state that if a person knows the purpose to which the goods were to be applied, it becomes his duty to supply the goods as could conform to the quality stipulated and in case of his failure he has to be held in damages to the extent of the actual loss suffered by the buyer. This proposition has been laid down in the case of Hydraulic Engineering Company v. McLawie ((1878) 4 Q D B 870).
32. Benjamin on Sale (VIII Edition) at page 998 has also succinctly pointed out the distinction that I have propounded above. He has stated as follows :- "The value of goods as warranted is under section 53 their intrinsic value, and not any special value which they may have to be buyer. To apply the latter standard would enable the buyer to recover special damages without having brought to the seller's knowledge the particular circumstances which may give to the goods their special value. The buyer's less, in the case suppos--ed, would not result "in the ordinary course of events" from the breach of warranty within the meaning of subsection (2). The special circumstances such as a sub-sale known to the seller, and the absence of a market, may give the goods an except--tional value."
What is stated above recognizes that the special circumstances regarding a sub-sale known to the buyer gives goods a special value.
33. Although Benjamin in his commentary has made knowledge of the seller a condition for awarding special value of the goods, Ramaiya in Indian Sale of Goods Act (II Edition) at page 1143 has expressed himself as follows :-- "Sub-sale by a buyer.-The question of consequential damages often arises in cases where a buyer who has purchased goods with a warranty, as a warranty of the goods being fit for a particular purpose, resells the goods with a similar warranty and, the goods proving defective, is held liable in damages.
It may seem that such damages flow as naturally from the breach of this warranty as they flow from the breach of the warranty that the goods correspond with the description, and, therefore, it is immaterial whether the original seller knew or contemplat--ed that the buyer intended to resell the goods."
The learned author has gone to the extent of expressing the view that in spite of the seller having no knowledge about the sub-- sale, he would be liable in the manner as if he had knowledge. The proposition appears to be too broad-based and I am not inclined to agree that even in cases where the seller had no knowledge about an intended sub-sale he may be liable for the entire loss, but I am formidably of the view that if the seller knew that the buyer was purchasing goods for a particular purpose It became his duty to supply goods as may conform to the warranty and in default the seller would be liable to compensate the buyer to the extent of his total loss including loss of profit. At this stage would like to refer to the case of Hamilton v. Magill ((1883) 12 Ir. 196) :-- "The facts were that the plaintiff's had obtained iron from defendants for being shipped to Philadelphia. The plaintiffs purchased a ton for -- 6/5s and re-sold it for -- 6/l0s. The Iron delivered was rejected by sub-buyer and then sold by the plaintiff for a total price of -- 975. The plaintiffs brought an action for breach of warranty and it was held that they were entitled to the difference between the sub-sale price and the price obtained by the plaintiffs on sale after rejection by sub- buyers. This case was decided following and considering the case of Slater v. Hoyle 89 L J K B 401 where damages were allowed only on the difference of price because it was not established that the seller knew about the sub-sale."
The learned Advocate for the appellants has contended that since the respondent had been able to obtain a price higher than the price he had paid to the appellant, he is not entitled to dimi-- nution of price as contemplated by section 59 of Sale of Goods Act. I cannot agree with him because the purpose of the law of compensation and damages is to bring the suffering party to the same position as he would have obtained had it not been for breach of contract. To put it in simple words the respondent should have been able to get Rs. 53-8-0 per bag of rice (less Rs. 2- 8.0 per bagdeducted on account of administrative charges), but because of breach of warranty on the part of the appellant be had to lose his profit. The only way then in accordance with law and in compliance with the principles of justice is to put the respon--dent in the position in which he would have been put for the breach of warranty. This is also in consonance with Illustra--petition
(m) to section 73, Contract Act.
34. I would also make a reference to another important circumstance in this case and that is that the respondent has acted reasonably. The respondent purchased the rice from the appellant at the rate of Rs. 42.00 per bag, but sold the rejected wagons at the rate of Rs. 45.00 per bag. This would show that the respondents have mitigated the damages by selling the goods at a price higher than the purchase price. He has all the same suffered a loss com, pared to what he would hive got. In the result I would allow the following reduction by way of diminution of price to the respondent out of the total claimed amount of Rs. 37,892-3-0 :-
(1) In respect of 2800 bags of rice that were accepted by the Government, the price paid was Rs. 5 per bag less than the agreed price. Out of these Rs. 5, a sum of Rs. 2-8-0 was pay--able to the Government as administrative charges. In respect of these 2800 bags the loss suffered by the respondents at the rate of Rs. 2-8-0 per bag works out to Rs. 7,000.00.
(2) 2000 bags rejected by Government were sold by the res--pondents at the rate of Rs. 45.00 per bag. If the goods had been of the warranted quality, the respondents would have been able to obtain Rs. 53-8-0 per bag from the Government, out of which the respondents would have had to pay Rs. 2-8-0 to the Government on account of administrative charges. The res--pondent would have received Rs. 51 per bag from the Govern--ment, but by selling the same at the rate of Rs. 45 per bag, he had to undergo a loss of Rs. 6.00 per bag. He is, therefore, entitled to diminution of a sum or Rs. 12,000.00 at the rate of Rs, 6.00 per bag.
35. With regard to the other damages, it was open to the respondent to have filed a separate suit under section 59(1)(b) of Sale of Goods Act, which he has not filed and while considering the question of diminution of price, the respondent cannot be awarded any relief on account of such loss.
36. The appellant is, therefore, entitled to a decree for the sum of Rs. 37,898-3-3 less Rs. 19,000.
37. I will, therefore, set aside the judgment and decree of the learned Single Judge and decree the suit of the appellants (plaintiffs) for a sum of Rs. 18,898-3-3. This amount shall carry interest at the rate of 6 per cent. Per annum from 17-12-1957 (the date of filing of the suit) till the date of realisation. The appel--lants (plaintiffs) shall also have proportionate costs both in this appeal and the suit.
MUHAMMAD HALEEM, J.-----I agree.
K. B. A.
Appeal accepted.