AJMAL MIAN, J.---These are two direct appeals filed under Article 185 of the Constitution of the Islamic Republic of Pakistan, 1973, which are directed against a common judgment dated 10-1-1993 of a Division Bench of the Lahore High Court passed in R.FA. No, 160 of 1979 filed by the respondents against the dismissal of their suit by the learned Civil Judge,- Ist Class, Lahore, through his judgment/decree dated 31--5-1979, allowing the same as under:-- "44. For the reasons given under each issue, we set aside the decree and judgment of the learned trial Court and allow the suit against defendant No, 1 and defendant No, 3 to the extent of Rs,56,05,395.89 plus Rs,5.50,800 that is, for Rs,61,56,195.89 in all. Both of them will be individually liable to pay the amount decreed and the payment made by any one of defendant No,1 and defendant No,3 shall discharge the decree. The suit in respect of other claims is however dismissed.
The suit parties to bear their own costs in the suit."
2. The brief facts are that the Federal Directorate of Agricultural Supplies, Ministry of Food and Agriculture, Government of Pakistan, Islamabad, hereinafter referred to as the Federation, floated a tender inquiry dated 22-3-1977 for the import of Solverix 10-G for 5000 MT from abroad. In response to the above tender inquiry after negotiations Sandoz Limited, Basle, Switzerland, hereinafter referred to as the Sandoz (which is the appellant in Civil Appeal No, 81 of 1993) through its local agents, M/s. Agro Marketing Corporation Limited, hereinafter referred to as the A.M.C. (which is the appellant in Civil Appeal No, 173 of 1993) entered into a contract dated 10-4-1977, whereby it undertook to supply 390 M.T. Solverix technical 81% from Switzerland against an L.C., hereinafter referred to as the technical material, which was to be formulated into Solverix 10-G 3000 tons through A.M.C. The last contract date for the supply of total formulated material, namely, 3000 tons was 30-6-1977 positive. It seems that technical material to the extent of 390 tons arrived in Pakistan on various dates through air which was handed over as per terms of the contract (Exh.P.20) to A.M.C. For formulation into formulated material. It may be observed that as per clause 8 of Annexure 'Ato the contract, the specification for packingof the formulated material was provided as under:-- "8. PACKING The material will be packed in suitable, polyethylene lined water proof cloth bags containing 25 Kg.
The packing will be able to withstand transit by rail and road."
It appears that the Deputy Secretary, Ministry of Agriculture, Cooperatives and Land Reforms, through his letter dated 30-4-1977 (Exh.P.61) addressed to A.M.C. Asked for the change of above specification. It may be advantageous to reproduce the above letter which reads as follows:-- "Dear Sir, Please refer to this Ministry's endorsement No,F.2-5/77-Pest, dated the 7th April, 1977 on the subject mentioned above. As you are aware, Solverix 10-G are systemic granules and there is great danger of causing hazards to the persons who will handle the product while loading, unloading and carrying it to the field.
2. It is, therefore, requested that instead of supplying material in polythelene lined water proof cloth bags containing 25 Kg., it should be supplied in steel drums conforming to the tender specification."
The above question remained under discussion and eventually on 30-5-1977 in the meeting held on the morning of above date between the Secretary, Ministry of Agriculture, Government of Pakistan, and the Managing Director, A.M.C., it was finally decided that the formulated material was to be packed in 25 Kg. Double polythelene lined water proof cloth bags. The above decision was confirmed by A.M.C. Through its Managing Director's letter dated 30-5-1977 addressed to the above officer (Exh. P.67 at page 397 of the paper book of R.F.A. No, 93 of 1979). The A.M.C. Also quoted its rates at Rs,1660 per ton in place of Rs,1,610. It may be stated that there are some letters on record, which indicate that during the relevant period the law and order situation in Karachi and Lahore was not up to the required level and on some dates curfew was imposed. The A.M.C. In some of its letters pointed out the above fact and also the factum that there was change in the specification. It intimated to the Federation that it could not be possible to complete the formulation up to the contracted date i,e. 30-6-1977. Be that as it may the General Manager, Federal Directorate of Agricultural Supplies, Government of Pakistan, through his letter dated 22-6-1977 addressed to A.M.C. (Exh.P.75 - at page 447 of the file of R.FA. No,93 of 1979) intimated to it that after 30-6-1977 no delivery of the formulated material would be accepted and no payment would be made to them. It was also stated that the department shall proceed against A.M.C. As per relevant terms of the contract as well as of the tender inquiry. It was also pointed out that negligible quantity of formulated material i,e. 120 M.T. Was supplied by the A.M.C. To Sindh Government by that date. It seems that up to 30-6-1977 the A.M.C. Was able to supply formulated material to the extent of 206 metric tons. After that litigation commenced inasmuch as A.M.C. Filed Civil Suit No, 422/1 of 1977 in or about August, 1977, in the Court of Civil Judge, Ist Class, Lahore, inter alia against the Federation for the recovery of Rs,45,61,980 plus an amount in Pakistani Rupee equivalent to Swiss Franks 159900.
3. It also appears that the A.M.C. Filed another suit, namely, Civil Suit No, 126 of 1978 in or about April, 1978, in the above Court of Civil Judge, Ist Class, Lahore, for the recovery of Rs,11,77,818 equivalent to Swiss Franks 222490, being the difference in air freight actually paid on the import of technical material 390 tons and the amount received by it from the Federation.
4. The above two suits are not the subject-matter of the present two civil appeals. It may be stated that Suit No, 422/1 of 1977 was decreed by the learned Civil Judge on 31-5-1979 for a sum of Rs,12,36,350 being the amount of damages; Rs,3,39,199 price of part of goods sold and delivered and Rs,9,13,029 equivalent to Swiss Franks .159900, being the amount of commission to A.M.C.
Against the above judgment/decree Federation filed R.F.A. No, 73 of 1979 in 'the Lahore High Court, which was allowed by a Division Bench through a separate judgment dated 10-1-1993, against which A.M.C. Filed Civil Appeal No, 171 of 1993 in this Court. It may further be stated that Suit No, 126 of 1978 was also decreed by the learned Civil Judge on 21-5-1979 for a sum of Rs,12,70,419 against which the Federation filed R.FA. No, 139 of 1979 which was allowed by the above Division Bench of the Lahore High Court through a separate judgment dated 10-1-1993, against which A.M.C. Had filed Civil Appeal No, 172 of 1993. The aforesaid Civil Appeals Nos. 171 and 172 of 1993 are being disposed of through separate judgments.
5. It appears that while Suit No, 422/1 of 1977 was at the stage of arguments the Federation filed Civil Suit No, 165/1 of 1978 for the recovery of Rs,1,10,001,587.68 as damages for the breach of contract against Sandoz, Sandoz (Pakistan) Limited and A.M.C. On the basis of the averments that the above defendants had committed breach of the contract inasmuch as they supplied 206.2 M.T. As against the contracted quantity of 3000 M.T. It was further pleaded that the time of completion was of great importance as the formulated material was to be used early June, 1977, for boosting the cotton crop. It was also pleaded that on account of delay the imported technical material was to lose its potency upon expiry of one year. The break-up of the claim was given in para. 11 of the plaint.
6. The Federation filed an application before the learned Civil Judge for consolidation of its above suit with the aforesaid earlier suits of the A.M.C. The aforementioned application was declined by the learned Civil Judge by his , order dated 7-4-1979. Thereupon, the Federation filed a civil revision in the Lahore High Court, which was disposed of by an order dated 7-4-1978 whereby the learned Civil Judge was directed that the above suit of the Federation should also be heard from day to day and all the suits be decided together on one and the same day.
7. The above suit was resisted by the above three defendants. Each of the defendants filed separate written statement. The main plea taken by Sandoz Pakistan Limited was that it had nothing to do with the contract, whereas Sandoz and A.M.C. In their written statements inter alia pleaded that the contract was not bilateral but multilateral inasmuch as first part of the contract for the supply of 390 tons technical material was between the Federation and the Sandoz; whereas the second part of the contract, namely, formulation of above technical material 390 tons into 3000 tons formulated material was between the Federation and the A.M.C. It was also pleaded by both of them that the breach was on the part of the Federation. It was further pleaded that time was not the essence of the contract. On the basis of pleadings of the parties the learned Civil Judge framed as many as 15 issues. The Federation in support of the suit's claim examined nine witnesses and inter alia produced documentary evidence Exhs.P.1 to P.53. The above witnesses included P.W.1. Syed Aftab Ahmed Bukhari, who was in fact the Managing Director of the A.M.C. And who was also examined at a later stage by the A.M.C. As D.W.
12. Whereas A.M.C. And Sandoz examined 13 witnesses and inter alia produced documentary evidence Exhs. D1 to D.
93.
8. The trial Court through its judgment/decree dated 31-5-1979 dismissed the above suit, against which the Federation filed R.FA. No, 160 of 1979, which was allowed to the above extent. Thereupon, Sandoz filed aforesaid Civil Appeal No, 81 of 1993 and the A.M.C. Filed Civil Appeal No,173 of 1993.
9. Before dealing with the contention of the learned counsel for the parties, it may be observed that both the learned counsel have referred to the paper books of R.FA. No, 160 of 1979 from which the present two appeals have arisen and also the paper book of R.FA. No, 93 of 1979 from which Civil Appeal No, 171 of 1993 has arisen for the purpose of relying upon the documentary evidence. This fact has also been noted by the High Court in the judgment under appeal.
10. In support of the above appeals, Messrs Fakhruddin G. Ebrahim and Aftab Ahmed Khan, learned ASCs appearing for the appellants, have vehemently contended that the contract was multilateral and not bilateral inasmuch as from the contract documents two separate contracts can be spelt out, namely, the contract for the supply of 390 tons technical material between the Federation and the Sandoz and the contra t for formulating 390 tons technical material into 3000 tons formulated mat rial between the Federation and the A.M.C. In furtherance of the above submissions, both have referred to clause 11 of Appendix No, 2 wherein inter alia it has been provided that after clearance of the store Federation would hand over the same to the formulator, A.M.C. At Karachi Airport for formulation purpose and that the latter would arrange formulation of the store into 3000 M.T. Of formulated material. It also contains the other detail as to the payment of the charges for formulation to A.M.C. In local currency etc. They have also referred to some letters.
On the other hand, Raja Muhammad Bashir, learned Deputy Attorney-General appearing for the respondents, has urged that the High Court has given cogent reasons for holding that the contract was bilateral, which reasons he supports.
11. It may be stated that the High Court has very elaborately and ably dilated upon this aspect of the case. We fully concur with the reasoning and the conclusion arrived at by it: However, it will suffice to reproduce the first page of the agreement which reads as follows:- "An agreement made on the 10th day of April, 1977 (One thousand nine hundred and seventy- seven) between the President of Pakistan (hereinafter called the "Purchaser") of the one part and M/s. Sandoz Limited, Basle, Switzerland (hereinafter called the "Suppliers) of the other part. Whereas it is agreed that the Purchaser shall purchase and the Suppliers shall supply the stores described in the attached schedule and at the prices mentioned therein subject to the conditions attached as Appendices and Annexures to this contract and those laid down in the Tender Enquiry No,FDAS- 2464-Proc-dated 22-3-1977 opened on 30-3-1977."
SIGNATURE SUPPLIER SIGNATURE SUPPLIER (Sd.) MAZAHIB (Sd.) Nasir-ud- Din Name MAZHAR HUSSAIN.
CHAIRMAN General Manager M/s. AGRO-MARKETING Corporation Limited, 140/A, Shadman Phase II, Lahore. Federal Directorate of Agricultural Supplies For & on behalf of the President of Pakistan For & on behalf of the M/s. Sandoz Limited, Basle, Switserland."
It may be observed that there are two parties to the above contract, namely, President on behalf of the Federation and Sandoz Basle. The A.M.C. Has signed the contract as the local agent for and on behalf of Sandoz which is evident from the abovequoted portion of the contract documents. This has been done by A.M.C. Pursuant to authorisation Sandoz. In this regard reference may be made to Exh. D.4 equivalent to Exh. P.23.
12. Besides the above factual position, it may be pertinent to refer to the following documents, which militate against the appellant's learned counsel's above contention:--
(i) Exh.P.2, which is a letter dated 25-3-1977 of Sandoz Pakistan Limited which inter alia contains the quotation for formulation at the rate of Rs,1,610 per metric ton ex-factory Karachi which was the rate quoted by A.M.C. On behalf of Sandoz;
(ii) sub-clause (2) of clause 11 of above Appendix No,2 makes it clear that the formulation charges at the rate of Rs,1,610 per metric ton would be paid to A.M.C. In Pakistani currency not remittable and convertible in foreign currency. If the above contract was not with Sandoz Limited and was factually with A.M.C., it was not necessary to clarify the above factum that the formulation charges would be paid in Pakistani currency not convertible;
(iii) Exh.P.19 is a, letter dated 2-6-1977 from the General Manager, Government of Pakistan, Federal Directorate of Agricultural Supplies addressed to M/s. Sandoz Limited, Switzerland, through M/s. A.M.C. Limited Lahore informing it that sub-clause (f) of clause 11 of Appendix No,2 to the contract and clause 8 of Annexure 'Ato the contract on account of change of specification of the packing were amended. If the formulation contract was not between the Federation and the Sandoz, there was no occasion for the above officer of the Federation to have forwarded the above amended sub-clauses of the contract documents to it. However, it was submitted by Mr. Aftab Ahmed Khan that this letter was not factually received by Sandoz. But, it is not denied that A.M.C. Had received this letter. It was the duty of the latter to have forwarded the same to Sandoz Limited.
(iv) The A.M.C. In para. 1 of its letter dated 8-8-1977 (at page 291 of the paper book of R.F.A. No, 160 of 1979 addressed to Mr. Ghulam Ishaq Khan. The then Secretary-General-in-Chief, Government of Pakistan, admit the- factum that it had signed inter alia the contract for formulation on behalf of Sandoz Limited as under:-- "We Agro-Marketing Corporation Ltd. Representatives of M/s. Sandoz Limited, Basle, had signed, on behalf of M/s. Sandoz Limited, a contract for the supply of 390 tons of Solvirex Technical and subsequent formulation of the material into 3000 tons of Solvirex 10-G. This contract was signed between M/s. Sandoz Limited and F.DA.S. On 10th of April, 1977."
(v) Sandoz's letter dated 28-11-1977 (at page 341 of the paper book of R.FA. No, 160 of 1979) addressed to General Manager, Federal Directorate of Agricultural Supplies inter alia contains the following statement:- "1. We are ready to assist you to the best of our abilities, in whatever arrangement you may decide upon for the formulation of the balance of the technical material. Further, we are also prepared to delegate from Basle, Mr. Eugen Rutz, Vice-Director, who can fly out to Pakistan for discussion with you at short notice."
13. The tenor of the above two letters affirms the factum that A.M.C. Had signed the above contract on behalf of Sandoz which included the formulation work. Mr. Fakhruddin G. Ebrahim has also contended that while deciding the above controversy the Court should not look into any correspondence between the parties preceding to the conclusion and execution of the contract. In furtherance of his submission he has relied upon para. 715 from Chitty's Law of Contract, 24 Edition (1971), the case of A. & J. Inglis v. John Buttery & Co. (1878 Appeal Cases (3) 552), and the case of National Bank of Australasia, Limited v. J. Falkingham & Sons (1902 Appeal Cases 585).
Whereas Mr. Aftab Ahmed Khan has referred to the case of Muhammad Akram and others v. Ch. Muhammad Salim (PLD 1964 (W.P.) Lahore 490), the case of Pakistan Tobacco Co. Ltd., Karachi v.
Pak Cigarette Labour Union and another (PLD 1977 Karachi 586), the case of Mahendra Nath Mandal and another v. Sheikh Samsuddin and others (AIR 1921 Calcutta 146) and the case of Midnapore Zamindari Co. Ltd. v. Muktakeshi Patrani (AIR 1926 Patna 340), in order to contend that if two constructions of a document are possible, the construction which goes against the party, who had drafted the document should be preferred. He also submitted that since the contract documents were drafted by the Federation, the same be construed against it.
14. In our view, the contract itself is explicit on the question, whether it is bilateral or multilateral i,e.
Tripartite. The above cases have no application to the case in hand. It may be observed that it is well-settled proposition of law that in case of any ambiguity in a contract document, the Court in order to resolve it and to ascertain the real intention of the parties, can have resort to the correspondence preceding and/or subsequent to the execution of the contract document, conduct of the parties and the attending circumstances. If we were to hold that Appendix No,2 to the contract documents by mentioning A.M.C. Instead of Sandoz has created an ambiguity, the above principle of construction of documents can be pressed into service; It will, not be out of context to point out that the reason for mentioning A.M.C. In the above Appendix No,2 is obvious, namely, that A.M.C. Was to arrange for execution of formulation work in Pakistan as the local agent of Sandoz and the charges for the same were to be paid in Pakistani currency. A perusal of the contract documents as a whole makes it clear that reference to A.M.C. In Appendix No,2 is in fact reference to it as the local agent of Sandoz.
15. The second point of controversy is, as to whether time for the completion of formulation work, namely, 30-6-1977 was the essence of the contract. Before touching upon the argument advanced by the learned counsel for the parties, it may be pertinent to reproduce section 55 of the Contract Act, 1872, hereinafter referred to as the Act, which reads as follows:-- "55. When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such any thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.
If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure."
A perusal of the above-quoted section indicates that it provides that when a party to a contract fails to do anything which he promised to do under the contract at or before the specified time, the contract or the remaining portion of the contract which has not been performed becomes voidable at the option of the promisee if the intention of the parties was that the time should be the essence of the contract. It further lays down that if the intention of the parties was not to make the time as the essence, in the above eventuality, the contract does not become voidable by the failure to do such things at or before the specified time, but in such case the promisee is entitled to compensation B from the promisor for any loss occasioned to him by such failure.
It may further be noticed that the last part of above section deals with the failure on the part of a promisee by laying down that in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts the performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss unless at the time of acceptance he gives notice to the promisor of his intention to do so.
16. It is evident from the above provision of the Act that it does not specify the nature of contracts in which the time would be the essence of the contract. It lays down a general principle that the time of a contract can be B made the essence of a contract if the parties so intended.
17. The Courts inter alia in the sub-continent while dealing with the contracts involving sale of immovable property have consistently held that unlers the contract itself expressly provides that the time of the performance of the contract is the essence, it would not be so. Suffice it to refer to some C judgments of this Court on the above legal proposition, namely, to the case of Abdul Hamid v. Abbas Bhai-Abdul Hussain Sodawaterwala (PLD 1962 SC 1) and to the case of Ghulam Nabi and others v. Seth Muhammad Yaqub and others (PLD 1983 SC 344).
18. However, generally in commercial transactions like sale of goods, the time for the delivery of the goods is considered as the essence of the contract. D In this regard reference may be made to the case of Chair Muhammad v. Abdul Hamid (1982 CLC 101), to the case of Mahabir Prasad Rungta v.
Durga Datta (AIR 1961 SC 1990) and to the case of M/s. China Cotton Exporters v. Beharilal Ramcharan Cotton Mills Ltd. (AIR 1961 SC 1295).
19. At this juncture it will be instructive to reproduce para. 333 from American Jurisprudence, 2nd Edition, Vol. 17, para. 352 from Chitty on Contracts, Twenty-First Edition, and a portion of para. B from Pollock on Contracts, Thirteenth Edition, which read as follows:-- Para. 333 from American Jurisprudence: "333. What makes, and determination whether, time of the essence.--There is no legal taboo against making time of the essence of a contract, and if it sufficiently appears that such was the intention of the parties, it will be so regarded, both at law and in equity, even where damages may compensate for the delay. It is clear therefore that the parties may make time of the essence of their contract by stipulating therein that 'time is of the essence', although those exact words are not essential. Any words which show that the intention of the parties is that time shall be of the essence of the contract or any clause which provides in unequivocal terms that if the fulfilment is not within a specified time the contract is to be void will have that effect. Furthermore, time may, even in equity, be deemed of the essence of the contract by a manifestation of intention from the contract or subject-matter involved, or by implication from the nature of the contract or circumstances of the case, such as by reason of the fact that the benefit to accrue from the consideration to be paid or the conveyance to be executed materially depends upon strict performance in point of time, or, as it is sometimes said, by reason of considerations arising from the nature of the subject-matter of the contract or the character of the interest bargained for. If time becomes material to the rights and interests of the parties to any substantial degree, it will be regarded as of the essence.
A rule as to when the facts and circumstances, the nature of the subject-matter of the contract, or the character of the interest bargained for make time of the essence cannot be stated in any general way. In the determination of the question whether time is of the essence, the general rules of construction are applied. Accordingly, the entire agreement is considered, together with the circumstances and purpose of the parties and the subject-matter. A new agreement extending the time of performance is evidence that the parties considered time as of the essence. Where the contract is created by telegraph and the surrounding circumstances evidence haste, a time stipulated therein is of the essence. On the other hand, the Court may take into consideration the fact that no injury would result to the promisee if time were regarded as not of the essence.
As in other cases of contract construction, the ultimate criterion as to whether time is of the essence of a contract is the intention, actual or apparent, of the parties, and before time may be so regarded by a Court there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances, of that intention. Ordinarily, the mere designation of a particular date upon which a thing is to be done does not make that date the essence of the contract. Nor will a limitation period in a contract make time of the essence, where the limitation does not refer to performance."
Para. 352 from the Chitty on the Contracts: "352. Time "of the essence of the contract."--The time of performance of any obligation under a contract may be made a condition of the contract. In other words, time may be "of the essence of the contract" if the parties have chosen to make it so. If, however, time is not expressly stipulated as a condition of the contract, how does the law regard provisions as to time? The rule of the common law was that time was always of the essence, and that if a particular time were fixed for performance under the contract an action would lie if performance were delayed. Now, under the Sale of Goods Act, 1893, w.10, unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of the contract of sale.
Whether any other stipulation as to time is of the essence depends on the terms of the contract.
The parties to such a contract, and to a contract for sale of land or work and material can give reasonable notice making time of the essence of the contract. In deciding what is reasonable notice the Court will take into account what remains to be done at the date of the notice, the fact that the purchaser has continually pressed for completion, or has before given similar notices which he has waived or that it is especially important for him to obtain early completion."
Para. B from Pollock on Contracts: "B. Stipulations as to time.--It is a familiar principle that in all cases where it is sought to enforce contracts consisting of reciprocal promises, and "where the plaintiff himself is to do an act to entitle himself to the action, he must either show the act done, or if be not done, at least that he has performed everything that was in his power to do."
Accordingly, when by the terms of a contract one party is to do something at or before a specified time, and when he fails to do such thing within that time, he could not afterwards claim the performance of the contract if the stipulation as to time were construed according to its literal terms. The rule of the common law was that "time is always of the essence of the contract". When any time is fixed for the completion of it, the contract must be completed on the day specified, or an action will lie for the breach of it.
The rule of equity, which has long been the general rule of English jurisprudence and to which the rule at law is now formally assimilated, is to look at the whole scope of the transaction to see whether the parties really meant the time named to be of the essence of the contract. And if it appears that, though they named a specific day for the act to be done, that which they really contemplated was only that it should be done within a reasonable time; then this view will be acted upon, and a party who according to the letter of the contract is in default and incompetent to enforce it will yet be allowed to enforce it in accordance with what .The Court considers its true meaning."
20. From the above-quoted passages from the above well-known treatises, it is evident:
(i) The parties to a contract may make time for the performance of their contract as the essence by expressly providing that "time is of the essence" or by using any other words which may manifest that the intention of the parties is that the time shall be of essence of the contract.
(ii) That the intention of the parties as to the factum, whether the time for the performance of the contract is of the essence or not may be ascertained by the nature of the contract or the circumstances of the case. If the nature of the contract is such that non-performance of the same within the stipulated period rendered the contract for the promisee useless or of no benefit, the time for the performance shall be construed as of the essence.
(iii) That if non-performance of the contract within the stipulated period does not cause any loss or injury to the promisee, time is not regarded as of the essence of the contract even when a date for completion of the contract is specified.
(iv) The rule of the common law was that time for performance of a contract was always considered as the essence and non-performance of the same within the agreed time used to render a promisor to be sued inter alia for damages, bit with The passage of time, the above E rule stands modified/negated inter alia by statutory provisions, like section 10(2) of the English Sale of Goods Act, 1893, which provides that stipulations as to the time of payment are not deemed to be the essence of the contract of sale, subject to a contrary express agreement.
(v) When under the terms of the contract both the parties have undertaken to do certain acts, in other words, they have made reciprocal promises, the party who brings an action against the other party will have to prove that he had performed his part under the contract or that he had done everything that was in his power to do before he could bring such an action.
Reference may also be made to the case of Charles Rickards LD v. Oppenhaim (1950) 1 K.B. 616), in which Lord Denning while sitting in Court of Appeal inter alia has held that where in a contract for the sale of goods time is the essence but the buyer upon the expiry of the time continues to press for the delivery, thus thereby waiving his right to cancel the contract he has a right F to give notice fixing a reasonable time for delivery thus making time again the essence of the contract. It has been further held that in similar circumstances in the case of contract of work and labour done the person who has ordered the work can give a valid notice to the contractor making time again the essence of the contract.
21. Revert to the present case, it may be stated that the thrust of the arguments of Mr. Fakhruddin G.
Ebrahim was that the contract does not expressly provide time as the essence of the contract. On the contrary, clause 19 of the tender documents inter alia provides payment of liquidated damages at the rate of 2% per month or part thereof on the value of undelivered quantity and, therefore, the intention was not to make time as the essence of the contract.
On the other hand, Raja Muhammad Bashir, learned Deputy Attorney-General appearing for the respondents, has submitted that since the contract has emphasised the completion date for the formulation of the technical material into formulated material by using the word "positive" with the date of completion, namely, 30-6-1977 and as the technical material to the extent of 390 tons was imported through air instead of by sea, the parties intended to treat the time as the essence of the contract.
22. Mr. Fakhruddin G. Ebrahim to reinforce his above submission has referred to the following cases:
(i) Abdullah v. Muhammad Siddique (1992 CLC 1561);
(ii) Shambhulal Panalal Vaish v. Secretary of State. (AIR 1940 Sind 1);
(iii) Pakistan v. Firm Lodhi House (PLD 1968 Lahore 923);
(iv) Sh. Muhammad Shafi v. The Lahore Improvement Trust (PLD 1959 (W.P.) Lahore 1); and
(v) M/s. Hind Construction Contractors by its Sole Proprietor Bhikamchand Mulchand Jain (Dead) by L.Rs, v. State of Maharashtra (1979) 2 Supreme Court Cases 70).
On the other hand, Raja Muhammad Bashir, learned Deputy Attorney-General has referred to the following two cases:--
(i) The Directorate of Industries and Mineral Development, Government of the Punjab, through its Director, Lahore and 3 ()thus v. Messrs Masood Auto Stores through Masood Ahmad Malik, Partner, Lahore (PLD 1990 Lahore 174);
(ii) Eskander Ali v. Mst. Alhamra Begum and others (PLD 1969 Dacca 214).
23. We may first take up the cases relied upon by Mr. Fakhruddin G. Ebrahim:-- In the above first case, Saleem Akhtar, J. (as his Lordship then was), while dealing with a contract of construction of building and the sale thereof, has dilated upon the question, whether time was the essence of the contract, as under:-- "The argument of the learned counsel for the defendants is that time was the essence of the contract and as the plaintiff failed to perform his part of agreement before that date, it has become void, unenforceable and therefore the suit is not maintainable. Under clause 6 of the agreement, the defendants were to obtain Capital Gains Tax Certificate within 30 days of the execution of the agreement, and the aaintiff was to make payment and complete registration within the same period. This certificate was obtained on 27-1-1981 i,e. About two months from the date of the execution of the agreement. It seems clear that the defendants themselves had not maintained the time schedule mentioned in the agreement. It is well-settled that mere insertion of a term in the agreement that a certain act will have to be performed up to a fixed time does not automatically make time essence of the Contract. The intention of the parties that time is the essence of the Contract can be gathered not only from the terms of Contract but also from the surrounding circumstances, the nature of property and transaction involved in the matter. This is a suit involving transaction relating to immovable property in which the defendants have failed to comply with condition regarding completion of sale. They therefore cannot insist on performance within the time fixed by the agreement. My finding is in the affirmative."
In the second case a Division Bench of the Sindh Judicial Commissioners while dealing with a contract for work held that the question, whether or not time is the essence of a contract is a question of intention of the parties to be gathered from the terms of the contract and where there is an express provision the time is the essence of the contract and at the same time the contract contains provision for extension of time in certain contingencies and for the payment of fine or penalty for every day or a week, on the unfinished quantity of the contract work on the expiry of the time provided in the contract. In such a case it cannot he said that it was intended that time should be the essence of a contract.
In the third case a learned Single Judge of the erstwhile High Court of West Pakistan at Lahore, while dealing with a construction contract and section 55 of the Act, has inter alia held that the question, whether time is the essence of the contract, is to be ascertained from the intention of the parties to be gathered from the terms of the contract and that the mere fact that in the contract itself time had been mentioned that the "time" was the essence of the contract, does not make time the essence of the contract if simultaneously provision of extension of time in certain contingencies is made in the contract.
In the fourth case the facts were that the petitioner purchased a plot .From Improvement Trust. One of the conditions of sale was to complete the property within 18 months. The petitioner failed to construct the building within the above period. The Trust allowed further time to the petitioner fixing the deadline but on the intervention of the Government, further time was allowed to the petitioner.
It was held that the Trust had waived its right of forfeiture on the ground of above breach because of the above extension.
In the above fifth case the Indian Supreme Court, while dealing with a building contract, held that the question, whether in a building contract time is the essence of the contract, depends on the intention of the parties to be gathered from the terms of the contract and that the provisions for imposition of penalty and extension of time would militate against inferring that the time was the essence.
23-A. We may now revert to the cases relied by Raja Muhammad Bashir, learned Deputy Attorney- General.
In the first case, a Division Bench of the Lahore High Court, to which one of us (Fazal Karim J.) was a member, while dealing with a contract for supply of spare parts for bulldozers and tractors and after referring the case-law, held that the ratio deducible from the referred auth9rities is that ordinarily in mercantile transactions, time is the essence of the contract; that this principle is not inflexible and it is the duty of the Court to further ascertain, whether in substance fulfilment of contract depends on other party's promise being performed by the fixed date or the target date was merely for the purpose to secure the performance within a reasonable time. It has been further held that the intention of the parties has to be gathered from the nature of the contract, surrounding circumstances and from the express stipulation in the contract. It has also been held that the antecedent conduct of the party may also be looked into. In the above case it was held that the promise i,e. The Province of Punjab waives the breach as to the time of performance.
In the second case a Division Bench of the Dacca High Court, while dealing with a contract of sale of agricultural land, reaffirmed the above well-settled principle of law that the question, whether time is the essence of the contract, is to be determined from the intention of the parties as gathered from the facts and circumstances of the case and that mere mention of time in the contract does not necessarily lead to the conclusion that time was the essence of the contract.
24. From the above case-law discussed, the following principles are deducible:
(i) That in case of a contract involving sale of an immovable property, time is not the essence in the absence of an express provision making it so.
(ii) That in case of commercial contracts time is generally the essence of the contracts unless from the terms of the contracts and the conduct of the parties it can be inferred otherwise.
(iii) That in all the contracts irrespective of the nature of the subject-matter, the question, whether time for performance of the contract specified is the essence, will depend on the intention of the parties to be ascertained from the terms of the contract. In doing so, resort can be made to the conduct of the parties preceding and subsequent to the conclusion of the contract.
(iv) That even in a contract in which time for the performance is not the essence of the contract, it can, be made as the essence of the contract if the promisor or promisee is guilty of an inordinate delay in performing his obligation by serving a notice specifying reasonable time for completion of the contract.
(v) That a contract in which the time for performance of the contract is the essence but the aggrieved party does not repudiate or cancel the contract upon the failure of the other party to perform his part under the contract within the agreed time, on the contrary continues to press for completion of the contract, he waives the term relating to making the time as the, essence of the contract. However, he can by serving a reasonable notice upon the defaulting party can re-make the time as the essence of the contract.
25. In the case in hand there is no doubt that the formulated material was to be used as pesticides for agricultural products. According to the Federation, it was to be used for cotton crop for the year 1977 and that was the reason that it agreed to import technical material from Switzerland by air instead of by sea. However, this has not been expressly provided in the terms of the contract. On the contrary, as pointed out hereinabove, clause 19 of the tender documents inter alia provides for the payment of liquidated damages for the delay though this is without prejudice to the right of the Federation to cancel the contract. Both the Courts below have concurrently held that the Federation has failed to prove that on account of the above failure on the part of A.M.C./Sandoz to complete the formulation work by 30-6-1977, there was any loss to cotton crop. On the contrary, a clipping from Financial Times of 20th October, 1977, published the statement of Mr. IA. Imtiaz, the then Federal Secretary of Agriculture (at page 295 of the paper book of R.FA. No, 160 of 1979) to the effect that the cotton crop for the year 1977 was expected to be 33% more as compared to the previous year. Somewhat similar opinion is contained in para.15 of the Economic Survey (at page 571 of the paper book of R.FA. No,160 of the paper book). Both the Courts below have disallowed the Federation's claims on account of loss of cotton crop and allied products. The clause of the contract relating to the date of completion of the formulation work should have been so worded as to make it clear that the time was the essence of the contract or it should have been made known to A.M.C./Sandoz that delivery of the formulated material after the expiry of the contract period would be of no use to the Federation. Nor the nature of the contract was such that upon the expiry of the contract period, it could be inferred that the formulated material would be of no use to the Federation. We may illustrate this by taking an example. Suppose 'Aplaces an order with a chemist for a life saving drug to be delivered immediately on the very day and the chemist fails to deliver the same resulting into death of person for whose treatment the drug was needed. In such a case, it can be said that the above drug would be of no use to the purchaser if it was to be delivered even after a delay of short period say 1/2 or an hour.
26. In our view, the mere fact that with the date of completion the word "positive" has been used or that the Federation provided in the contract for G importing technical material by air instead of by sea, are not themselves sufficient to hold that the time was the essence of the contract. The above factums are to be viewed with the terms of the contract as a whole and the facts of the present case. It is the case of A.M.C. That on account of the change in the specifications of the packing material, which matter remained under discussion for nearly 32 days and because of imposition of the curfew in Karachi and Lahore etc. The above formulation work could not have been completed by 30-6-1977. It may be stated that clause 24 of the tender documents provided events, which were to constitute Force Majeure. If the change of specification of the packing material had resulted in some delay not necessarily of 32 days, and if the imposition of the curfew had caused any delay, the original date of completion was no longer enforceable. In this regard reference may be made to an order of this Court in the case of Zaheer Ahmad and another v. Abdul Aziz and others (1983 SCMR 559), in which this Court, while declining leave to appeal against the judgment of the Lahore High Court in a matter involving sale of a house, has observed that a party guilty of preventing completion of a contract within time cannot plead that the time was the essence of the contract. In the present case, in our view, it was the duty of A.M.C. To have made a formal application for the extension of time specifying the exact period for extension on the ground which they could sustain legally, which they failed to do so. There is no doubt that the performance of A.M.C. Was not commendable. Within the contract period, it was able to complete the formulation work to the extent of 206 metric tons against the total of the contracted quantity of 3,000 metric tons, which comes to about 6 or 7 per cent. The heavy burden was on them to justify the delay of each day. We are not impressed by the argument of Mr. Fakhruddin G. Ebrahim that it was for the Federation to have refixed a reasonable date of completion. It is for a contractor to apply for the extension of the period and it is not for an employer to extend voluntarily the period. However, his above argument has relevance to the question, whether the Federation through its letter dated 22- 6-1977 (Exh.P.75) could refuse to take delivery of the formulated material after the expiry of the above contract date i,e. 30-6-1977. As we have held that the time was not the essence of the contract, the Federation could not have repudiated the contract but could have claimed damages for the breach of the contract in terms thereof in consonance with law. The Federation could also make time as the essence of the contract by serving a notice providing therein a reasonable period for completion. The Federation's notice of 8 days contained in above Exh.P.75 cannot be treated as a valid notice for making the time as the essence of the contract. We have already referred to hereinabove that the question of changing the specifications of packing was first raised in Exh.P.61 by the Deputy Secretary in his letter dated 30-4-1977. The above question was finally resolved on 30-5-1977 as is evident from Exh.P.67, which is A.M.C.'s letter dated 30-5-1977 with reference to their meeting with the Federal Secretary concerned about the change of specification.
There is lapse of about 30 days between the above two documents. However, A.M.C. Has failed to bring on record reliable material to indicate that on account of the above change in the specification and the delay in taking the decision of the above change, how much quantity of technical material they could not convert into formulated material. The burden was on them. This question has also been dealt with by the High Court very exhaustively.
27. However, this does not affect the conclusion which we intend to take in the above appeals. Even if we were to hold that time was the essence of the contract or that there was breach of contract on the part of Sandoz, the High Court could not have decreed the above two items in favour of the Federation unless the same could have been brought within the purview of sections 73 and 74 of the Act. It may be pertinent to reproduce the above sections, which read as follows:-- "73. 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.
When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.
Explanation.-- In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.
74. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
Explanation. A stipulation for increased interest from the date of default may be a stipulation by way of penalty.
Exception.--When any person enters into any bail-bond, re-cognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Federal Government or of any Provincial Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
Explanation.-- A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested."
A perusal of the above-quoted section 73 shows that it deals with the consequences of breach of a contract and the basis on which compensation for any loss or damage is to be assessed by providing that 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 L likely to result from the breach of it. It further provides that such compensation was, not to be given for any remote and indirect loss or damage sustained by reason of such breach.
It may also be noticed that second part of the above section deals with a case when an obligation resembling those created by contract has been incurred and has not been discharged. In such a case the compensation is to be assessed on the same basis if there was a breach of contract.
It may further be pointed out that explanation ,,to above section 73 provides guideline to the Court by laying down that in estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.
It may be pointed out that section 74 deals with a contract which provides the amount of compensation in the form of penalty or liquidated damages in case of breach. It provides that in such cases the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby to receive from the party who has broken the contract, reasonable compensation not exceeding the amount so named or as the case may be the penalty stipulated for.
Explanation 1 lays down that a stipulation for increased interest from the date of default may be a stipulation by way of penalty but to this exception is provided in case of bail-bond or other instrument of same nature furnished under the law or the orders referred to in the above exception.
In such a case, in the event of breach of the condition the whole amount becomes payable.
Whereas explanation 2 to section 74 clarifies that a person who enters into a contract with Government does not necessarily thereby undertake any public duty, or compromise to do an act in which the public are interested.
28. The first item of damages awarded by the High Court, namely, Rs,56,05,395.87 is on account of difference of freight charges on 390 metric tons technical material between air and sea freight. It is the case of the Federation that it would not have imported the above technical material through air if the formulated material would not have been urgently required by it and the time for formulation of the same into formulated material would not have been the essence of the contract.
On the other hand, the case of Sandoz is that the Federation wanted to import 5,000 metric tons formulated material from abroad and that if it would have imported the same from abroad even by sea, it would have cost much more than, what it had paid on the import of 390 metric tons of technical material by air. According to them there has been saving. In our view, the question in issue is, as to whether the above item can be said to be the loss or damage which naturally arose in the usual course of things from the alleged breach on the part of A.M.C./Sandoz. The contract itself provided the import of 390 metric tons technical-material by air. There is no reliable evidence to conclude that the Federation would not have imported the above technical material by air if they would have known that A.M.C./Sandoz would not be able to complete the formulation work by N 30-6-1977. It was the decision of the Federation itself though in one or two letters suggestion was made by A.M.C./Sandoz to import part of the technical material by air but this suggestion does not, in any way, make them liable to pay the above amount unless it can be shown that the above alleged loss naturally arose in the usual course of things from the alleged breach as pointed out hereinabove. In our view, the above item is too remote and indirect and is not covered by section 73 of the Act.
29. As regards the second item awarded by the High Court, namely, Rs,5,50,800, being the difference on account of rates between the contracted rates and the rates awarded to the new contractor, it may be observed that it is an admitted position that this item was not claimed by the Federation in the plaint. In the absence of any claim in the plaint, the same could not have been decreed. Even on merits, the Federation failed to prove that it had suffered any 0 loss. Mr. Fakhruddin G. Ebrahim invited our attention to the contract documents of the new contractor (at pages 609 to 616 of the paper book of R.F.A. No,160 of 1979) to point out that the difference in the rates was on account of use of steel drums for packing of the formulated material instead of using polyethylene double lined water proof cloth. The learned Deputy Attorney-General was unable to controvert the above factual position. In this view of the matter, the above item is also not sustainable.
30. The result of the foregoing discussion is that the above appeals are allowed; the judgment under appeal is set aside and the suit of the Federation shall stand dismissed. However, there will be no order as to costs.
FAZAL KARIM, J.---This judgment will dispose of Civil Appeals No,171 and 172 of 1993.
2. The facts have been fully stated in the judgment of my learned brother in Civil Appeals Nos.81 and 173 of 1993 and I respectfully adopt them. In so far they are relevant for the disposal of these appeals, they can be shortly stated as follows. The Federation of Pakistan (the Federation) invited tenders for the import of 5000 MT pesticides known as Solverix 10-G. Sandoz Limited, Basle, Switzerland (the Sandoz) submitted its tender through its local agents, M/s. Agro Marketing Corporation Limited (A.M.C.). It appears that after the Sandoz had submitted its tender, there were negotiations between the Federation and the A.M.C. And the result produced was the contract dated 10-4-1977, whereby the parties agreed that instead of Solverix 10-G (which is the technical name for the finished product, hereinafter it will be described as the formulated material), the Sandoz would supply 390 M.T. Of raw technical material (technically known as Solverix 81% from Switzerland (it will hereinafter be described as the technical material), that the technical material would be delivered to the Federation at Karachi ; that the Federation would hand over the technical material to the A.M.C. And that the technical material would be formulated into 3000 M.T. Of Solverix 10-G, by the A.M.C. The contract provided that the formulated material would be delivered to the Governments of the Punjab and Sindh by the end of June, 1977 positively. The contract was signed by Mr. Nasir-ud-Din, General Manager, Federal Directorate of Agricultural Supplies for and on behalf of the Federation, and Mr. Mazahir Hussain, Chairman, A.M.C., for and on behalf of the Sandoz.
3. Three suits were instituted in the Civil Court at Lahore; (i) Suit No,422/1 in August, 1977 for the recovery of Rs,45,71,980.00 plus Swiss Francs 159900.00 by the A.M.C. Against the Federation, (ii) Suit No,126 instituted in April, 1978 for the recovery of Rs,11,77,818.00 equal to 222490 Swiss Francs also by the A.M.C. Against the Federation and (iii) Civil Suit No,165/1 of 1976 for the recovery of Rs,110001587.68 by the Federation against (1) the Sandoz, (2) Sandoz (Pakistan) Limited and (3) the A.M.C.
4. These appeals viz. Civil Appeals Nos.171 and 172 of 1993 have arisen out of Suit No,421/1 of 1977 and Suit No,126 of 1978 respectively. Civil Appeals Nos.81 and 173 of 1993 have arisen out of Civil Suit No,165/1 of 1978, they are being disposed of by a separate judgment of today's date. CIVIL APPEAL NO.171/93
5. The case of the A.M.C. As laid in its plaint in Suit No,421 of 1977, which was a suit for the recovery of Rs,45,61,980,00 plus Swiss Francs 159900 was as follows: The A.M.C. Had in their capacity of Commission Agents, brought about the deal resulting in the contract dated 10-4-1977 between the Sandoz and the Federation for the import of 390 Metric Tons of technical material from Switzerland and was entitled to 159900.00 Swiss Francs as commission.
The A.M.C. Had also been authorised by the Sandoz to sign the contract on its behalf. In terms of the contract 390 Metric Tons of the technical material was imported into Pakistan and was delivered to the Federation. Swiss Franc 159900.00 were to be paid on the submissions of the bill by the A.M.C. To the Federation; the bill was duly submitted but has remained unpaid. The contract dated 10-4-1977 was in two parts; one for the supply of 390 Metric Tons of technical material which part was completed with the import into Pakistan of the technical material and its delivery to the Federation; and the second was between the A.M.C. And the Federation; by it the Federation was to hand over the technical material to the A.M.C. And the latter was to formulate it into 3000 Metric Tons. Thus the contract dated 10-4-1977 was a tripartite agreement to which the plaintiff subscribed as the Agents of Messrs Sandoz to the extent that the bargain concerned it and in his own right in so far as independent obligations were incurred." It was the A.M.C.'s case that in view of the nature of the formulated material "unless packing has first been got ready the actual work on the technical material cannot start". As the formulated material was to be delivered to the Government of the Punjab and Sindh by the end of June, 1977, the A.M.C.'s position was that of a bailee "of the technical material in question. The contract dated 10-4-1977 contained the packing specification. But the Federation by its letter dated 10-4-1977 ordered the A.M.C. To change the packing specification. This was followed by a prolonged correspondence. Ultimately "a de novo" contract came into existence on 2-6-1977, whereby the packing specifications were changed and the formulation cost was increased from Rs,1,610 to Rs,1,645 per Metric Ton. It was, therefore, the A.M.C. Case that in addition to the fact that the time did not remain of the essence of contract after the substitution of material clause relating to packing therein and the formation of de novo contract on 2-6-1977, the contract in question had even otherwise become impossible of performance by 30-6-1977, on account of force majeure" in that "a major portion of the period in which the contract had to be performed was affected by riots, acts of sabotage, civil disturbances and other disturbances beyond supplier's control". Karachi Hyderabad and Lahore were the main centres of the production of the formulated material, and "the force majeure had a direct and substantial effect on the contract rendering it incapable of performance within the stipulated time".
6. The plaint went on to say that the A.M.C. Had produced and delivered to the Federation 206.2 Metric Tons of formulated material, but its price, Rs,3,39,199.00, had not been paid.
7. According to the plaint, the Federation repudiated the contract vide its letter dated 22-6-1977, although "the plaintiff was ready and willing to perform the contract and persisted in the production effort till the day of its unilateral repudiation".
8. The A.M.C. Claimed Rs,33,36,432.00 on account of special loss suffered by it; Rs,3,39,199.00 for the 206.2 Metric Tons of formulated material supplied by it; and Swiss Franc 159900.00 as commission the total being Rs,45,61,980.00 plus Swiss Franc 159900.00 with interest "till the fmal realization of the decretal amount".
9. The Federation contested this suit by filing a written statement. It was denied that the contract was tripartite contract or that the A.M.C. Was so far as the formulation part of the contract was concerned an independent party. The A.M.C., it was said, "had no lawful authority to institute the present suit". It was admitted that the A.M.C. Was entitled to "receive commission in Pakistani currency at the rate which was prevalent at the time of the submission of the tender". It was also admitted that after the import into Pakistan of 390 Metric Tons of technical material, the same was handed over to the A.M.C. For formulation. According to the Federation, the formulated material was to be delivered by 30-6-1977 and the time was of the essence of the contract. The A.M.C., it was alleged, had not even started "the initial works for the purpose of formulation till 4-6-1977". It was denied that the A.M.C. Was entitled to any special damages. The changes in the contract by the letter dated 2-6-1977, it was alleged, did not affect the date of delivery or the fact that the time was of the essence of the contract. According to the Federation, the A.M.C. Was entitled to extension of time neither on the ground of the changes in the contract in two respects nor on account of force majeure. The letter dated 22-6-1977, it was maintained, was not repudiation of the contract "but it was a reminder to the plaintiff that the contract is to be performed within the stipulated period i,e.
30-6-1977. On the other hand it is obvious from the facts pleaded in the plaint that the plaintiff himself chose to repudiate the contract in question. It is a case of repudiation of contract by the plaintiff to the detriment of the defendant causing them a great loss running into crores of rupees."
It was the A.M.C., so maintained the Federation, that had committed a breach of contract. Despite the novation of the contract on 2-6-1977, the date of delivery"remained the same and the time remained the essence of the contract throughout".
10. The A.M.C. Filed a replication and on the partiespleadings, the following issues were framed:--
(i) Whether the suit is not maintainable in its present form ? OPD.
(ii) Whether the suit has been filed by an authorised person? If not, with what effect ? OPP.
(iii) Whether the suit is bad for misjoinder of causes of action ? OPD.
(iv) Whether the suit has been properly valued for purposes of court-fee in all the reliefs ? If not, what is the correct valuation? OPP.
(v) Whether the suit is bad for misjoinder of parties and is hit by the provision of section 80, C.P.C.?
OPD.
(vi) Whether there was a novation of 2-6-1977 in original contract dated 10-4-1977? If so, with what effect? OPP.
(vii) Was the time essence of the contract? If so, whether it remained as such even after 2-6-1977.
(viii)Whether the defendants rescinded the contract on 22-6-1977?
(ix) If issue No,8 is in favour of the plaintiff, whether the defendants were entitled to rescind the contract? OPD.
(x) Whether there was force majeure and the plaintiff could not perform the contract on account of the same ? Its effect on the contract? OPP.
(xi) Whether the plaintiff had delivered to the defendant 206.2 M.T. Of formulated material ? OPP.
(xii) Whether the plaintiff is entitled to receive Rs,39,199.00 for formulation 206.2 M.T of Solverix-10-G material, or not ? OPP.
(xiii)Whether the plaintiff is entitled to claim and recover damages from the defendant? If so, to what extent ? OPP.
(xiv) Whether the plaintiff has claimed any remote damages? If so, whether he is entitled to claim any compensation for such remote damages? OPD.
(xiv-a) Whether the payment of commission was not to be made according to the prevailing rate of currency at the time of payment? OPD.
(xv) Relief.
11. As has been observed above the tenders were invited for the import of 5000 M.T of pesticides from abroad, but as a result of negotiations between the Federation and the A.M.C., the parties agreed that instead of importing the formulated material, that is to say, the material in its finished form, the material in its raw form, that is to say, technical material should be imported. In this connection it is sufficient here to refer to a letter dated 7-4-1977 (Exh.D-262), which was addressed by the A.M.C. To the Joint Secretary, Ministry of Agriculture, Islamabad, it refers to their meeting of that date and says that "in the light of your not desiring to import finished granules due to their high price, the A.M.C. Had investigated the possibility of formulation in Pakistan. The letter went on to quote the price, the mode of delivery and to state the date by which the delivery would be- effected. Earlier by a letter of the date 6-4-1977, the Federation had conveyed its decision to the General Manager, Federal Directorate of Agriculture Supplies, Lahore "that an order for 3,000 M/Tons of Solvirex 10-6 may be placed on M/s. Agro Marketing Corporation Limited for formulation in Pakistan" at the rate Sand by the date mentioned therein. It was as a result of these negotiations that the contract dated 10-4-1977 (Exh.P-60) was signed between the Sandoz and the Federation.
By the contract the parties agreed "that the purchaser shall purchase and the suppliers shall supply the stores described in the attached schedule and at the prices mentioned therein subject to the conditions attached as Appendices and Annexures to this contract and those laid down in the Tender Enquiry No, FDAS-2464-Proc-P dated 22-3-1977 opened on 30-3-1977". The particulars of the stores were "Solverix Tech. 81% ; their specifications were "as per Annexure 'Afor the formulated Salverix 10-G" and its quantity was 390 Metric Tons. In Appendix No,1, the country of origin, was stated to be Switzerland, the name of the supplier and the manufacturer was M/s. Sandoz Limited Basle, Switzerland and the A.M.0 was stated to be the local agents of the Sandoz. Against the column 'delivery period', it was stated that "the formulated Solvirex 10-G will be delivered by 30th June, 1977 positively". Appendix No,2 contained, among others, the terms for the supply of samples and the consequence of any article "failing to satisfy the checking, inspection and tests etc.", one of the consequences being the right to the purchaser to "terminate the contract and recover from the suppliers the loss which the purchaser thereby incurs..........." Item No,10 of Appendix 2 related to the terms of payment; it provided among others, that "payment of 100% of the total FOB value, plus Air freight at actuals but not exceeding the amount prescribed in the schedule to this contract will be paid according to the quantity actually despatched through a confirmed and irrevocable letter of credit to be opened by the Assistant Director Accounts and that commission will be paid to the Local Agents in non-convertible and non-remittable Pakistani Currency by the Deputy Director Accounts, Federal Directorate of Agricultural Supplies, Lahore, on the production of Inspectioncum- Receipt Certificates issued by the consignee and certificates froth the Deputy Director Procurement, FDAS, Lahore and the Director Plant Protection Institute, Lyallpur with regard to the receipt samples "Item No,11 in Appendix 2 is "Instructions regarding delivery of technical material and formulation". It inter alia provides (a) that after the clearance of the stores, consignee will hand over the same to the formulator M/s. Agro-Marketing Corporation Limited, at Karachi Airport for formulation purposes, (b) M/s. Agro-Marketing Corporation Limited would arrange formulation of the stores into 3000 Metric Tons of Solvirex 10-G, in accordance with the specifications at Annex. "A";
(c) the formulated material will be delivered by M/s. Agro Marketing Corporation Ltd., to the representatives of Government of the Punjab and Sindh on ex-factory Karachi basis by the end of June, 1977 positively'. Details of their shares will be intimated later on" and formulation, packing, handling charges of formulated material and all other charges of allied nature @ Rs,1,610.00 per Matric Tons will be paid to M/s. Agro-Marketing Corporation Limited in non-remittable and non- convertible Pakistani Currency against presentation of Inspection-cum-receipt certificate from the Consignee in respect of Technical material and from Deputy Director Agriculture, Government of Punjab and Director of Agriculture (Extension), Government of Sindh in respect of formulated stores " Annexure "A" of the contract provided, by its clause 7, for the storage stability, saying that "the material will not deteriorate within two years under the normal conditions of storage in Pakistan" and by its clause 8 for packing, saying that "the material will be packed in suitable, polyethlene lined water proof cloth bags containing 25 k.g. The packing will be able to withstand transit by trial and road."
12. Hardly twenty days later, the Federation started the correspondence culminating in the letter dated 2-6-1977 (Exh.P-253) which modified the contract dated 10-4-1977 in two material respects.
The first letter on the subject is dated 30-4-1977, by which the Federation requested the A.M.C. That "instead of supplying material in polyethlene lined water proof cloth bags containing 25 k.Gs., it should be supplied in steel drums conforming to the tender specification." This was followed by an exchange of letters and holding of meetings, to which it will be necessary to make a detailed reference later. It suffices to say here that by the Federation's letter dated 2-6-1977 (Exh.P-253), clause 11, sub-clause (f) of the contract was amended, and the charges for formulation, packing, handling of formulated material were increased from Rs,1,610 to Rs,1,645 per M.T. And the original Serial No,8 of Annexure 'Ato the contract was substituted by the following:-- "The material will be packed in 25 k.g. Double polyethelene (each at least of 0.03 mm thickness) lined cotton bags. The packing will be able to withstand transit by rail and road."
The letter dated 2-6-1977 (Exh.D-253) ended with the following:-- "All other terms and conditions of the contract remain unchanged".
13. The learned Civil Judge decided issue No,2 in favour of the A.M.C. Holding that the A.M.C. Was legally competent to institute the suit. As issue No,1 depended upon the finding on issue No,2 that too was decided in A.M.C.'s favour. Issue No,3 too was decided in favour of the A.M.C. The findings on issues No,4 are not material. On issue No,6 the learned Civil Judge held that the amendment dated 2-6-1977 amounted to novation of contract and that "the original date of delivery i,e. 30-6- 1977 had been given up as agreed by necessary implication". On issue No,7 the finding returned by the Civil Judge was that the time of delivery of the formulated material viz. 30-6-1977 was not of the essence of the contract and even if it was, the parties had by their act and conduct abandoned the same and in any case the time did not remain of the essence after 2-6-1977. The learned Civil Judge found, under issue No,8, that the letter dated 22-6-1977 had the effect of repudiating the contract and held that the Federation had rescinded the contract on that date. The finding of the learned Civil Judge on issue No,9 was also in favour of the A.M.C. And so was on issue No,10, the view of the learned Civil Judge being that there was force majeure due to which the A.M.C. Could not perform the contract and as such it was entitled to get reasonable time for formulation and that the date 30-6-1977 was not to be strictly observed. The learned Civil Judge found, under issues Nos.11 and 12, that the A.M.C. Had formulated and delivered 206.2 Metric Tons of formulated material and that the A.M.C. Was entitled to recover a sum of Rs,3,39,199 from the Federation on account of formulation charges. The learned Civil Judge found under Issues No,13 and 14 that the A.M.C. Was entitled to recover a sum of Rs,8,86,350 on account of damages as contained in Annexure 'Fto the plaint and Rs,3,50,000 as contained in Annexure `K` to the plaint, the total being Rs,12,36,350. The learned Civil Judge found that the A.M.C. Was entitled to recover a sum of Rs,9,13,029 on account of commission equal ,to Swiss Francs 159900 and decided issue No,14-A accordingly.
14. On the Federation's appeal, only the findings on Issues Nos.6 to 10, 12, 13, 14 and 14-A were challenged before the High Court.
15. On the question whether the contract dated 10-4-1977 (Exh.P-60) was "multilateral or bilateral", the learned Judges in the High Court held that "there was only one contract for the supply of Solvirex 10-G which, however, made separate provisions respecting Solvirex technical 81 as it was to be paid for even before its arrival and separate specific provisions dealing with formulation of Solvirex 10-G".
16. As regards the finding on issue No,6, namely whether there was a novation on 2-6-1977 in original contract dated 10-4-1977 (Exh.P-60) and whether as a result of such novation the original date of delivery i,e. 30-6-1977 was given up by necessary implication, the learned Judges in the High Court held that "novation is a substitution of the contract and not a mere variation of its terms" and that it was to be shown as a fact "that the intention of the parties was to substitute a new contract for the original one in order to establish novation of a contract". In the view of the learned Judges "the intention to bring about a substituted contract has not been established in the instant case", for the material to be supplied and the price, therefore and the conditions of supply all remained the same. "The only change was in packing specification. This change cannot be said to be very material though for the extra bag to be provided extra cost was agreed to be paid." In the view of the learned Judges "no basis exists on record to hold that the contract stood novated with the change in packing specification through amendment of the contract vide letter dated 2- 6-1977 and as such it had no effect on the other terms of the contract including the date of delivery." Accordingly the findings of the learned Civil Judge on issue No,6 was reversed and the issue was decided in favour of the Federation. On the important question, reflected in issue No,7, namely "whether the time was of the essence of the contract ? If so, whether it remained as such even after 2-6-1977 ?" the learned Judges in the High Court held "that the time of delivery was of the essence of contract" and reversed the learned Civil Judge's finding on issue No,7 also.
17. Dealing with Issue No,8, the learned Judges in the High Court held that the letter dated 22-6-1977 (Exh.P-75) merely gave notice to the A.M.C. To adhere to the date of delivery; that the reference to the tender enquiry "in the letter Exh.P-75 further shows the intention of the appellant to adopt the procedure prescribed in clause 19 of the tender enquiry", and that Exh.P-75 was neither intended to operate as or would otherwise amount to repudiating the contract or having the effect of repudiating or cancelling the contract. "It was a mere reminder to show progress and to complete the delivery by the specified date as otherwise it will take action as per terms of the contract and tender enquiry". In the view of the learned Judges "when the defendant was itself choosing to act according to the agreed conditions, it was desiring the supplier either to complete the delivery within time or to explain the cause of non-delivery in accordance with these very agreed terms and conditions". The conclusion thus reached was that the Federation had not rescinded the contract on 22-6-1977.
18. On issue No,9, also the learned Judges in the High Court set aside the finding of the learned Civil Judge and held "that the plaintiff-company failed to perform its part of the obligation within the specified date and that even otherwise the plaintiff was not in a position to supply the contracted material within a reasonable time". The learned Judges held further that the Federation "was entitled to rescind the contract though it had not rescinded it" and that it was A.M.C. Which had breached the contract by not fulfilling its obligation by abandoning the work.
19. On the question of force majeure reflected in Issue No,10, also, the learned Judges in the High Court held that "principle of force majeure is not being invoked and the breach of obligation and non-fulfilment of conditions of contract by the plaintiff cannot be covered under alleged impossibility of performance. In the opinion of the learned Judges "there was no question of allowing reasonable time to the plaintiff to complete the formulation of 3000 metric tons of Solvirex 10 G as the plaintiff never asked for further time and was also neither ready nor capable of completing formulation of contracted quantity within reasonable time". The result of this finding, so observed the learned Judges, was "that the plaintiff failed to perform its part of the contract, rather it abandoned the contract and must, therefore, be held in breach of the contract".
20. Dealing with Issues Nos. 11 and 12 the learned Judges affirmed the finding that 206.2 metric tons of Solvirex 10-G (formulated material) was delivered by A.M.C. To the Federation and that its price came to Rs,3,39,199. They then posed the question "whether the plaintiff-company is entitled to receive these formulation charges on account of delivery of 206.2 metric tons of Solveris 10-G". The learned Judges referred to the finding of the learned Civil Judge namely that the present case was covered by illustration B to section 65 of the Contract Act and held that view could not be sustained. In their opinion the AMC could not claim the amount of formulation charges, for it had "failed to complete the supply and delivery of contracted quantity and as per our finding the plaintiff/respondent has committed breach of contract as it had failed to perform its part of the contract." They held that "the value of the advantage i,e.
206.2 metric tons of Solvirex 10-G through formulation, cannot be estimated or adjudged (within the meaning of section 65 of the Contract Act) as no evidence is available on record to show the use of 206.2 metric tons, the cost of remaining 370 metric tons of the technical material to be formulated into Solverix 10-G etc." and section 65 did not, therefore, hold the AMC "to claim formulation charges amounting to Rs,3,39,199. Accordingly they reversed the learned Civil Judge's finding on Issue No 12 also.
21. The learned Judges in the High Court then dealt, as had the learned Civil Judge, with Issues Nos.
13 and 14 together. They noticed that the AMC had detailed their losses in Annexures "Fand "K" of the plaint; they included the expenses which were allegedly incurred for the procurement of material, stores, hiring plants and adopting facilities and transportation charges (Annex.'F') and the losses which were allegedly caused to the AMC "on account of non-lifting of Anthio Dithane and Kelthane".
The advances allegedly given to the suppliers of various materials which on alleged cancellation of contract were rendered unrecoverable and semi-finished granules and blank granules which were statedly rendered unfit, were also detailed in Annexure 'Kof the plaint. After dealing at some length with the details in Annexures 'Fand 'Kthe learned Judges in the High Court held the AMC disentitled to the sum of Rs,12,36,350; according to them "neither the expenses for material and plants and the damages claimed stand proved nor these amounts are otherwise recoverable from and payable by the appellant defendants".
22. On the last Issue, issue No,14-A, which was whether the payment of commission was or was not to be made according to the prevailing rate of currency at the time of payment, the learned Judges noticed that the sum of Rs,9,13,029 arrived at by the learned Civil Judge was by applying the conversion rate on the date of decision of the suit". After referring to clause 10(b) of the Appendix 2 of the contract, the learned Judges posed another question: "when payment of commission fell due and became payable". As they read that clause, "Commission will be paid on the production of Inspection-cum-Receipt Certificate issued by the consignee and certificates from the Officers mentioned therein with regard to receipt of samples as per clause 5(d) or clause 6(d) of that appendix.
23. In the view of the learned Judges the finding that clause 10(b) of Appendix denotes intention of the parties to pay it at the rate of conversion prevailing at the time of payment is correct but the other conclusion that "rate prevailing at the time of judgment will be the rate of conversion on which payment of commission is to be made is erroneous". They were of the view that if date of actual payment was the determining date then how date of judgment of trial Court can be treated so? They found that the technical material arrived at the Karachi Air Port from 30th April to 27th May, 1977 and commission was to be paid on production of the certificates mentioned in clause 10(b) read with clause 6(d). They held, therefore, it was the rate of conversion "then prevailing which will be the rate of conversion for payment of agreed commission, if otherwise admissible and claimable after making adjustment of recoveries". The learned Judges then noticed that in the plaint as original filed on 23rd August, 1977, the A.M.C. Claimed Rs,6,24,180 as the amount of commission in Pakistani currency. But later the plaint was amended to claim Swiss Francs 159900.
In the view of the learned Judges in the High Court this amendment was obtained "through misrepresentation as commission is not payable in Swiss Francs. It is payable in Pakistani Currency and that too at the rate prevailing on the date when payment fell due and is payable." The plaintiff having claimed amount of commission in Pakistani Currency had, so held the learned Judges in fact admitted the rate of conversion as well as the amount of the claim; such admission could not in their opinion, be allowed to be withdrawn by seeking amendment of the plaint. In no case was the A.M.C., so held the learned Judges, entitled to a sum in excess of Rs,6,24,180.
24. Accordingly the learned Judges in the High Court reduced the amount of commission from Rs,9,13,029 as allowed by the learned Civil Judge to Rs,6,24,180.
25. In the result, the learned Judges disallowed "all the sums of money allowed and decreed by the learned trial Judge except the sum of Rs,6,24,180 payable on account of commission.
26. As has been observed above these appeals and Civil Appeals Nos. 81 and 173 of 1993 have arisen out of the same contract dated 10-4-1977 (Exh.P-60) as amended by the document dated 2-6-1977 (Exh.D-253). Two questions, which are mixed questions of fact and law are common to all these appeals; they are (1) whether the contract dated 10-4-1977 (Exh.P60) was a tripartite contract, that is to say, as regards the supply of the technical material it was a contract between the Federation and the Sandoz, and as regards the formulation part of it, it was a contract between the Federation and the AMC? And (2) whether the time was so far as the formulation part of the contract was concerned was of the essence?
27. On the first question, we have held in Civil Appeals Nos. 81 and 173 of 1993, in agreement with the learned Judges in the High Court, that the contract in question was a contract between the Federation and the Sandoz; that this was one whole contract and that the Sandoz were as much party to the formulation part of the contract as to the other part concerning the supply of the technical material.
28. It should be mentioned here that the parties are no more at issue on the competence of the AMC to institute these suits and the above conclusion that the contract was between the Federation and the Sandoz and that the AMC had in negotiating its terms and in signing the contract deed acted as the agents of the Sandoz should not detract from that finding.
29. As to the second question namely whether time, so far as the formulation part of the contract was concerned, was of the essence, we have held in Civil Appeal No, 81 and 173 of 1993 - and the quotations that follow are all from the judgment of my learned brother Ajmal Mian, J.--that section 55 of the Contract Act "does not specify the nature of contracts in which the time would be the essence of the contract. It lays down a general principle that the time of a contract can be made the essence of a contract if the parties so intended"; that no doubt the formulated material was to be used as pesticide for agricultural products but the Courts below have concurrently held that the Federation has failed to prove that on account of the above failure on the part of AMC/Sandoz to complete the formulation work by 30-6-1977, there was any loss to cotton crop", that on the contrary, it appears from clippings from the Financial Times of 20th October, 1977 and para. 15 of the Conomic Survey "that the cotton crop for the year 1977 was expected to be 33% more as compared to the previous year. Both the Courts below have therefore, disallowed the Federation's claim on account of loss of cotton crop and allied products"; that the clause "relating to the date of completion of the formulation work should have been so worded as to make it clear that the time was the essence of the contract or it should have been made known to AMC Sandoz that delivery of the formulated material after the expiry of the contract period would be of no use to the Federation. Nor the nature of the contract was such that upon the expiry of the contract period, it could be inferred that the formulated material would be of no use to the Federation'; that mere fact that with the date of completion the word "positive" has been used or that the Federation provided in the contract for importing technical material by air instead of by sea, are not themselves sufficient to hold that the time was the essence of the contract. The above factums are to be viewed with the terms of the contract as a whole and the facts of the present case"; that clause 24 of the tender documents provided events, which were to constitute Force Majeure. If the change of specification of the packing material had resulted in some delay not necessarily of 32 days, and if the imposition of the curfew had caused any delay, the original date of completion was no longer enforceable"; that in the circumstances of the case "it was the duty of AMC to have made a formal application for the extension of time specifying the exact period for extension on the grounds which they could sustain legally, which they failed to do so"; that there is no doubt "that the performance of AMC was not commendable", for "within the contract period, it was able to complete the formulation work to the extent of 206 metric tons against the total of the contracted quantity of 3000 metric tons, which comes to about 6 or 7 per cent."; that, therefore, the heavy burden was on them to justify the delay of each day". It was not for the Federation, but for the contractor "to apply for the extension of the period and it is not for an employer to extend voluntarily the period". We have held further that as time was not of the essence of the contract, "the, Federation could not have repudiated the contract but could have claimed damages for the breach of the contract in terms thereof in consonance with law. The Federation could also make time as the essence of the contract by serving a notice providing therein a reasonable period for completion". The Federation's notice for 8 days, we have held further, as contained in Exh. P-75 "cannot be treated as a valid notice for making the time as the essence of the contract". A period of 30 days was consumed in resolving the controversy regarding the changes in packing specification; yet "AMC has failed to bring on record reliable material to indicate that on account of the above change in the specification and the delay in taking the decision of the above change, how much quantity of technical material they could not covert into formulated material. The burden was on them".
30. We have held also that even if time was of the essence of the contract or there was breach of the contract on the part of Sandoz, "the High Court could not have decreed the above two items in favour of the Federation unless the same could have been brought within the purview of sections 73 and 74 of the Act".
31. I respectfully agree with the reasoning given and the conclusions arrived at by my learned brother, Ajmal Mian, J. I add a few observations of my own to supplement those reasons, particularly because in the opinion of the learned Judges in the High Court, the parties pleadings in this case have a distinguishing feature.
32. The learned Judges in the High Court caught at a phrase in para. 8 of the plaint in Suit No, 422 namely "that the time did not remain of the essence of contract after the substitution of material clauses relating to packing therein and the formation of de novo contract on 2-6-1977" to hold that this was an admission on the part of the AMC that the time was intended to be of the essence of the contract. It suffices to say in this behalf that in the Federation's written statement, the fact that time was of the essence of the contract was expressly pleaded and it was upon that pleading that issue No, 7 namely "Was the time essence of the contract? If so, whether it remained as such even after 2-6-1977" was formulated. However that may be, the words in para. 8 of the plaint, referred to above, were not to be read in isolation. The plaint had to be read as a whole, in the light of the written statement and the replication. However that may be, the words "the time did not remain of the essence " could as well mean this that even if the time was, to begin with, of the essence, it ceased to be of the essence with the amendment of the contract in two material respects.
33. Ulpian says, "what is more in accordance with good faith among humans than to maintain the agreement they have made". So the question in each case is what is the agreement that the parties have made? In the context of this case, did they intend, by setting out a time-table for the performance of the contract, that time should be of the essence? Now these time-schedule clauses vary from contract to contract. Section 55 of the Contract Act, 1872 merely provides that when the partieshave specified a time for the performance of the contract, the parties intention being that time should be of the essence of the contract, and the contract is not performed at or before the specified time, then the contract becomes voidable at the election of the P promisee. It leaves the expression "time should be of the essence of the contract" undefined, and wisely so, for whether time is or is not of the essence must inevitably depend upon the parties intention to be gathered from the terms of the contract as a whole, and the antecedent circumstances leading to the contract.
34. As it has been often said, "The foundation of the whole matter.Is, after all, good sense...The law means to carry out the intention of the parties..." (The 0" Common Law by Justice Oliver Wendell Holmes, at page 334). And the rule of interpretation is that the more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more R necessary it is that they shall make that intention abundantly clear". (Lord Reid in 'Schuler A.G. v.
Wickman Tools (1974) AC 235, 251).
35. Human affairs and business affairs are of infinite variety. They do not neatly fit into categories and classes. The question whether in a particular contract, the specified time was or was not of the essence cannot, therefore, be solved by classifying a contract as being of a commercial character or by saying that it relates to immovable property. As has been pointed out by the House of Lords of England in a recent case (United Scientific Holdings v. Burnley B.C. (1977) 2 All ER 62, 67) "In some stipulations in commercial contracts as to the time when something must be done by one of the parties or some event must occur, time is of the essence; in others, it is not. In commercial contracts for the sale of goods prima facie a stipulated time of delivery is of the essence, but prima facie a stipulated time of payment is not (Sale of Goods Act, 1893, S.10(1); in a charterparty a stipulated time of payment of hire is of the essence. Moreover a contract to tenancy of business premises would not appear to be more of a commercial character than a contract for sale of those premises. Nevertheless, the latter provides a classic example of a contract in which stipulations as to the time when the various steps to complete the purchase are to be taken are not regarded as of the essence of the contract".
36. The common lawyer's way of saying that time was of the essence was that "timeous performance was a .Condition precedent to enforcement of reciprocal obligations" and the law, as it has been evolved since 1875, which is "symptomatic of the growing tendency in the Courts of Common Law to adopt a more rational classification of contractual stipultions and the consequences of their non-performance than that into which the rules of pleadings peculiar to the old forms of action led them" may well come to enquire whether a contractual stipulation as to time is so fundamental to the efficacy of the contract that any breach discharges the other party from the contractual obligations...."(United Scientific Holdings case at pp.69, 84), and as Lord Diplock pointed out in that case (at p.70), by 1873, (incidentally the date of the enactment of our Contract Act, which contains section 55, was the year 1872), "(1) stipulations as to the time at which" 'a party was to perform a promise on his part were among the contractual stipulations which were not regarded as `conditions precedentif his failure to perform that promise punctually did not deprive the other party of substantially the whole benefit which it was intended that he should obtain from the contract; (2) when the delay by open party in performing a particular promise punctually had become so prolonged as to deprive the other party of substantially the whole benefit which it was intended that he should obtain from the contract it did discharge that other party from the obligation to continue to perform any of his own promises which as yet were unperformed; (3) similar principles were applicable to determine whether the partiesduties to one another to continue to perform their mutual obligations were discharged by frustration of the adventure that was the object of the contract. A party's ability to perform his promise might depend on the prior occurrence of an event which neither he nor the other party had promised would occur. The question whether a stipulation as to the time at which the event should occur was of the essence of the contract depended on whether even a brief postponement of it would deprive one or other of the parties of substantially the whole benefit that it was intended that he should obtain from the contract".
37. The change in the judicial approach to the time fixing clauses is reflected in the following two statements of the law in Halsbury's Laws of England (4th Edn.), para. 481: "At common law stipulations as to time in a contract were as a general rule, and particularly in the case of contracts for the sale of land, considered to be of the essence of the contract, even if they were not expressed to be so, and were construed as conditions precedent " but the modern law, in the case of all contracts, as stated in the same para. 481 is: "Time will not be considered to be of the essence unless:--
(1) the parties expressly stipulate that conditions as to time must be strictly complied with" or (2) the nature of the subject-matter of the contract or the surrounding circumstances show that time should be considered to be of the essence "
38. This statement of the modern law was approved in the United Scientific Holdings case.
39. The test to determine whether time is or is not to be regarded as of the essence, therefore, is whether failure to perform the promise timeously will deprive the promises of the whole or substantially the whole benefit which it was intended that he should obtain for the contract. Or, in other words, the test is to contrast the detriment to one party if the date of performance is to be regarded as the essence with the detriment to the other party if the date of performance is not to be so regarded. This test was applied in the United Scientific Holdings case and I would respectfully adopt it for the purposes of this case.
39-A. Section 55 of the Contract Act makes the contract voidable at the option of the promisee if the specified time was intended to be of the essence and the contract is not performed within the specified time, but if the time was not intended to be of the essence, it entitles the promisee to compensation from the promisor for any loss occasioned to him.
40. A contract is said to be void in which a contract fails to be made when it seems to, have been made, and a contract is said to be voidable, when it had been made but it is subject to being unmade at the election of one party. To avoid is to insist on both parties being restored to the position in which they stood before the contract was made. (Holmes The Common Law', at pp. 308, 315).
41. 'Repudiation is the refusal by a party to discharge its obligations under the contract. It occurs when one of the parties to a contract evidence by him conduct or openly declares his intention not to fulfil his obligations under the contract. "Where there has been such repudiation by one party of his contract obligations the other party may either acquiesce and betake himself to a claim for damages for breach or may contest the repudiation, but if his protests are unavailing, as he cannot in general enforce specific implement, his only remedy in the end is also a claim of damages for breach". (Heyman v. Darwins (1942) AC 356, 371). As Lord Reid said in "White and Carter v. Mc Gregor" (1962) AC 413, 427) the general rule cannot be in doubt. "If one party to a contract repudiates it in the sense of making it clear to the other party that he refuses or will refuse to carry out his part of the contract, the other party, the innocent party, has an option. He may accept that repudiation and sue for damages for breach of contract, whether or not the time for performance has come; or he may if he chooses disregard or refuses to accept it and then the contract remains in full effect".
42. The right to avoid the contract given by section 55 of the Contract Act is therefore, not the same thing as 'repudiation'. For, if a contract has been A rightly avoided, it has the effect of unmaking the contract, but to use the A graphic phrase of Asquith L.J. In "Howard v. Pickford Tool Co. Ltd." (1951) 1 K.B. 417, 421), an unaccepted repudiation is a thing writ in water.
43. The question of the time being of the essence of the contract must therefore, be considered in the light of all the circumstances of this case. To begin with, the tender inquiry was for the supply of 5000 M.T. Technical material; it was not for the supply of formulated material. It was after the Sandoz had submitted its tender that there were negotiations between the Federation and the AMC as the local agent of the Sandoz. It was as a result of those negotiations that the contract dated 10-4-1977 (Exh. P60) for the supply of 390 M.T. Of technical material was signed. That material, the parties agreed, would be formulated into 3000 M.T. Of the finished product. Much was tried to be made of the fact that the Government agreed to air lift the technical material in pursuance of the contract dated 10-4-1977 at the suggestion of the Sandoz, it was said that the object was to ensure that the formulated material was available by the end of June, 1977. Whether it was at the suggestion of the AMC or the Sandoz that the Federation was induced to air lift the technical material, the fact of the matter is that the air lifting of the technical material became a part of the contract dated 10-4-1977. The AMC's letters dated 26-3-1977 (Exh. D-257) and 7-4-1977 (Exh. D-262) throw sufficient light on this subject. By Exh. D-257, the AMC wrote to the Federation to say that the formulated material could not be supplied within the stipulated period i,e. By 31-5-1977
(that) it should be noted was the date by which according to the tender inquiry the formulated material was to be supplied); that the technical material could be supplied "according to indicated schedule which can then be formulated at Karachi 0.20 tons per day; that considerable time" can be saved if a portion of technical material is air-freighted". Thus the suggestion that a portion of technical material should be air-freighted must be read in the context that formulated material could not be supplied by the stipulated date 31-5-1977. Exh. D-262 which was written on 7-4-1977, that is, three days before the contract (Exh.P-60) was signed referred to the meeting of that date; by it the AMC informed the Federation that "in the light of your not desiring to import finished granules due to their high price, we have further investigated the possibility of formulating another 1000 M/tons of Solverix-10G by importing 130 tons of technical material by air" and confirmed that much technical material would be imported by air at the price mentioned therein. It appears, therefore that what induced the Federation to import the technical material and then to be formulated in Pakistan was the high cost of the import of formulated material from Switzerland. We were not referred to any evidence on the record to show that .The cost of the formulated material, if imported from Switzerland, would have been less than the cost of the technical material, if it were formulated in Pakistan. Comparison of the cost incurred on air lifting with the cost which would have been incurred if the technical material had been imported by sea or road was, therefore, not of much help to . The Federation. Nor do we think that a combined reading of Exh.D-262, Exh.D-263 and Exh.D-268-A provided evidence on the time being of the essence of the contract. There was nothing in the correspondence preceding the contract dated 10-4-1977 or in the contract document itself to show that the technical material was intended to be formulated by 30-6-1977 to enable the Governments of the Punjab and Sindh to use it in the cotton crop of that year.
44. The contract document dated 10-4-1977 did not, in the column 6 "delivery period" in Appendix 1, used the expression 'essence of the contract'. What it did was to say that the formulated material "will be delivered by 30-64977 positively". The contract document did not provide for the consequences of the failure to keep the time schedule either. On the other hand, in column 6 of Appendix II of the contract, which contained special instructions, it was expressly provided that in the case of the sample provided failing "to satisfy the checking, inspection and tests or which shall not be in accordance with the description the purchaser (the Federation) with then be at liberty among others, to terminate the contract and recover from the suppliers the loss which the purchaser thereby incurs". The consequences were provided in clause 19 of the tender enquiry which was by the terms of the contract document dated 10-4-1977 itself part of the contract. That clause, among others, provided the penalty for delivery beyond the specified time. The effect of this clause it seems to us, is that the parties themselves contemplated that there could be delivery of the formulated material after the date fixed. It suggests, and suggests clearly, that the parties did not intend that the specified date for the delivery of the formulated material should be regarded as of the essence of the contract. In such cases, the time fixed for the performance of the contract should, in our view, be treated as the starting point for the calculation of damages. There is then the important fact which too in our opinion militates against the specified time, viz. 30-6-1977 being of the essence of the contract namely that the 390 M.T. Of the technical material was to be air lifted from Switzerland to Karachi during a period of time, starting from 30-4-1977. It appears that the AMC had, for the purpose of formulation, to commission three plants, two at Karachi and one at Lahore. In this behalf it is pertinent to refer to a letter dated 26-5-1977 (Exh. P-66). This was one of the letters which the parties exchanged in connection with the change in packing specifications.
We shall have the occasion to revert to it in some detail when considering the effect of the change in packing specifications. Here we refer to it to point out that according to this letter, the AMC had brought it to the notice of the Federation that "the first Formulation Plant at Karachi had been commissioned to start immediately", when the technical material started arriving on 30th April, 1977; that the second Plant at Karachi and the third at Lahore "were due to be commissioned on 15th May, 1977, on ,completion of the D work which they had in hand at the time" and that "up-to- date (that is up to D 26th May, 1977) 260 M.T. Of technical material had arrived, i,e. To formulate 2000 M. Tons Solvirex 10-G" and that "the balance 130 M. Tons will be arriving in five flights from Switzerland and during the next two weeks". The Federation did not feel aggrieved on account of the technical material having not been air lifted within the time schedule, if any. We must, therefore, presume that time schedule was kept. What is to be emphasized is that fact that the entire 390 M.T. Of technical material was not to be received by the AMC in one go and that it was to be received over a period of time and that by 26th May, 1977, 260 MT of technical material had been received by the AMC. All these facts and circumstances in our view combined to reinforce the conclusion that time was not of the essenceof the contract. In the circumstances the word 'positivelyadded nothing, and we would hold that the real intention of the parties was that the contract should be performed by the specified date, viz. 30-6-1977 or within a reasonable time.
45. The next question is what is the effect of the modification of the contract brought about by the letter dated 2-6-1977 (Exh. P.253). It is in our view unnecessary to enter into the fine distinctions between novation and amendment. The parties are agreed that what the letter dated 2-6-1977 did was to modify the contract dated 10-6-1977 in two respects and we have no doubt in our mind that those two respects were material respects. In that behalf it must be borne in my mind that according to the contract document dated 10-4-1977, Rs,1,610.00 per M/ton were the charges for formulation, packing and handling of the formulated material. In other words Rs,1,610.00 included the packing and handling charges. It has been noted that the packing specification according to the contract document dated 10-41977 was "polythelene lined water proof cloth bags containing 25 K.G". The Federation appears to have changed its mind as to the packing specification within twenty days of the signing of the contract document and wrote the letter dated 30-4-1977 (Exh.P.61) to the AMC, requiring that the formulated material should be supplied in steel drums. The AMC replied vide letter (Exh. P-62) that this would raise the rate from Rs,1,610 to 3,350, it is also significant to note that that letter expressly stated that the proposed change in packing specification would be one of the delaying factors. The Federation appears to have persisted in the supply of the formulated material in steel drums, so much so that by its letter dated 14-5-1977 (Exh.
P-63) it asked the Federal Directorate of Agriculture Supplies to invite tenders for steel drums. This provided the AMC into writing the letter dated 16-5-1977 (Exh.64), whereby the AMC informed the Federation that the arrangement "that containers are supplied by another party" was unacceptable to them; the letter went on to say that as "the contracted packing specifications are no longer acceptable to you we have, therefore, been constrained to stop formulation of the material pending a final decision on this issue". The letter also said that the AMC would be able to supply the formulated material at the rate of Rs,3,350 per M.T. And emphasized "that this rate in the present disturbed conditions prevailing in the country is realistic " The letter ended with the observation "that to assure timely delivery of the granules to the farmers, immediate decision in the matter may be taken and necessary amendments made in the contract". This was followed by the Federation's telegram dated 21-5-1977 (Exh.D.W.-1/2) and the AMC's telegram saying that since the arrival of the technical material, "formulation work was held up due to disturbance and daily curfew at Karachi. The formulation now held up for last four days due to power shedding at SITE Karachi.
Changed packing specifications conveyed to us vide your telegram of twenty-first May involve increased costs and time period. Are working these out for necessary amendment in contract".
There is then the letter dated 23rd May, 1977 (Exh.-65) from the AMC to the Federation informing the latter that the AMC was working out additional costs "involved in small 5Kg. Double polythylene lined cotton bags", adding that "additional time period would be required for packing into these bags because the number of packing unit will now increase from 120000 to nearly 6,00,000 units".
This was followed by letter dated 26-5-1977 (Exh. P-66) to which reference has already been made.
This repeated that if the packing was to be in 5KG bags, the cost would increase to Rs,2330.00 per M.Ton; that apart from the delay caused by changing the packing specification, there were factors such as curfew in parts of Karachi, affecting the Highways which had a direct effect on their formulation operation; the letter went on to say that in view of the "handicaps, completely beyond our control, it will not be possible to complete the delivery by 30th June, 1977, though it will be our constant endeavour to complete the supplies as quickly as possible".
46. It should be mentioned here that the learned Judges in the High Court have observed that changes in the packing specification was not mentioned as a factor contributing to the delay in the process of formulation. If we may say so with respect that observation is not correct; as has been shown, the factors such as curfew, loadsheding mentioning in that letter were "apart from the delay caused by the changes in packing specification".
47. After this protracted and time consuming correspondence, which started with the suggestion from the Federation that the supply of the formulated material should be in steel drums, the parties ultimately agreed that the packing should be in 25 K.G double polyethelene line cotton bags instead of the original specification "polyethelene lined water proof cloth containing 25 bags". This necessitated two amendments in the contract document dated 10-4-1977, namely in the rate and in the packing specifications and this was done vide letter dated 2-6-1977 (Exh. P-56). It was tried to be argued by the learned counsel for the AMC that the AMC was not a party to this modification; in that behalf it was pointed out that the letter was addressed to the Sandoz and that the AMC had not agreed to the modification. This argument is too fragile to be supported. It is not denied that the letter was received by the AMC as the agent of the Sandoz. There is nothing to show that the AMC had refused to accept the modified terms and the inference must, therefore, be that the modified terms as contained in the letter dated 2-6-1977 (Exh. 253) were accepted by the AMC for and on behalf of the Sandoz. The AMC had signed the contract document dated 10-4-1977 as the local agent of the Sandoz. There is no question that it had the authority to do so and assuredly it had the authority to accept the modified terms.
48. It was the AMC's case in its plaint that "unless packing has first been got ready, the actual work on the technical material cannot start" (para. 4 of the plaint). This was not expressly denied. This highlights the importance of the packing specification. We have already referred to the AMC's letter dated 16-5-1977 whereby the AMC told the Federation that as the packing specifications contained in the contract document dated 10-4-1977 were no more acceptable to the Federation, the AMC were "constrained to stop formulation of the material pending a final decision of this issue". The time so consumed or if we may say so, the time so wasted, because the Federation vascillated between the steel drums and double polythelene line cotton bags, which was 32 days, must in our view be taken into account. The total period at the disposal of the AMC for the formulation of the material was 81 days, and the AMC was, therefore, entitled to have that period extended at least by 32 days. It was said that the letter dated 2-6-1977 expressly stated that "all other terms and conditions of the contract remained unchanged". In construing those words it must not be forgotten that so far as the modified terms were concerned, the concentration of initiative as also the possibility of benefit was in the Federation. In any event, the parties might well have thought that no change in the date 3-6-1977 was necessary because in its inception that date was not intended as of the essence of the contract. But even if it was of the essence of the contract, the truth of the matter is that as many as 32 days were E consumed in bringing about the modification of the terms of the contract document in two material respects. As has been shown, this had affected the progress of the formulation process.
49. This was, therefore, a case in which the time schedule in the contract document dated 10-4- 1977 so far as the formulation part was concerned, was not of the essence and, therefore, the Federation was not entitled to avoid the contract. There was nothing to show that failure to perform the promise by the AMC timeously deprived the Federation of the whole or substantially the whole of the benefit which it was intended that it should obtain from the contract. The cotton crop for 1977 season was not shown to have suffered because the formulated material could not be used for that season. The nature of the material was also not shown to be such that it was useless for subsequent cotton crops or other crops. The contract document (Exh.P-60) rather shows that the material would not detriorate "within two years under the normal conditions of storage in Pakistan.
(item 7 of Annexure 'Ato the contract document). In contrast the formulation process depended upon a number of factors, one of them being the arrival of the technical material in Pakistan from time to time. The AMC had commissioned one of the three formulation plants at Karachi.
Admittedly it had formulated 206.2 M.T. The AMC must have spent a lot of money on commissioning the plant and the term of the contract as to time if it were of the essence was highly detrimental to the AMC. Suppose that if all had gone well, the AMC had been able to formulate a major portion of the material, say 2900 M.T. By the end of June, 1990. Could it be said that the failure to formulate the trivial quantity of 100 was intended to give the right to the Federation to avoid the contract. Such an unreasonable intention cannot be attributed to the parties; for, obviously if the parties had gone so far with the performance of their obligations, they could not be restored to the position in which they were when the contract was made. It was therefore, not a case in which the Federation could have been intended to have the option of avoiding the contract in the manner in which it did by its letter dated 22-6-1977.
50. The letter dated 22-6-1977 (Exh. P.75), told the AMC that the delivery period is about to expire but we have heard nothing about the progress made in this regard, except that a negligible quantity of 120 M/Tons is understood to have been supplied to Sindh Government". The letter went On to say that "that may please be treated as final notice that we shall not accept the delivery after 30-6-1977 and no payment will be made", adding that "we shall proceed against you as per relevant terms of the contract as well as that of tender enquiry". On the basis that time was of the essence of the contract, this letter may well be regarded as one whereby the contract dated 10-4- 1977 as modified by the letter dated 2-6-1977 was avoided within the meaning of section 55 of the Contract F Act. But as we hold that time was not of the essence, the Federation had no F right to avoid the contract, that is to say, to unmake the contract dated 10-4-1977 as modified by the letter dated 2-6-1977. There can however be no doubt that the letter dated 22-6-1977 was repudiation of the contract; it said so in clear and express terms that the Federation would not accept any delivery G after 30-6-1977 and would not pay for it and the AMC could not but accept this G repudiation. This hurried repudiation, hurried because it did not take, as the Federation as a reasonable person should have taken, all the circumstances into account, must produce the result that the Federation also was in breach of the contract. The Federation could not, therefore, invoke to its aid the liquidated damages clause that is clause 19 of the tender inquiry or clause 11 of the contract deed dated 10-4-1977, which provides for the payment of formulation packing, handling charges at the rate of Rs,1,645 per M.Ton to the AMC in non-remittable and non-convertible Pakistani currency against presentation of Inspection-cum-Receipt Certificate from the consignee in respect of Technical material and from Deputy Director of Agriculture, Government of the Punjab and Director of Agriculture (Extension), Government of Sindh in respect of formulated stores "after adjusting all claims, if any", of the consignee and of Deputy Director of Agriculture, Government of Punjab, Lahore and Director of Agriculture (Extension), Government of Sindh, Hyderabad. As the Federation did not, and was not entitled to, invoke the penalty clause 19 in the tender enquiry no question of "adjusting all claims" by the Federation, therefore, arose.
51. It follows directly from the above findings that the learned Civil Judge was right in decreeing the A.M.C. Claim for Rs,3,39,199 on account of delivery of 206.2 M.T. Formulated material. With respect we are unable to agree with the learned Judge in the High Court that the A.M.C. Was not entitled to the value of 206.2 M.T. Of the formulated material actually received by the Federation because the value of the advantage of that material could not be estimated or adjudged "as no evidence is available on record to show the use of 206.2 metric tons, the cost of remaining 370 metric tons of the technical material to be formulated into Solvirex 10-G". The payment was to be made at the rate of Rs,1,645 per M.T. It is in evidence that the remaining technical material was handed over to the Federation under the order of the Court. It was not the Federation's case that the technical material so received back by the Federation from the A.M.C. Had become useless or that it was not used for the purpose of formulation at all.
52. The second head under which the learned Civil Judge granted Rs,9,13,029 to the A.M.C. Was on account of A.M.C.'s commission as local agents, for the role it played in bringing about the contract dated 10-4-1977. The amount of commission was stated to be 159900 Swiss Francs. As has been noticed above the learned Judge in the High Court agreed with the learned trial Judge that by clause (b) of Appendix-2, the partiesintention was "to pay it at the rate of conversion prevailing at the time of payment". They however did not agree with the Civil Judge that the rate prevailing at the time of judgment should be the rate of conversion on which payment of commission is to be made". In taking that view, the learned Judges in the High Court were impressed by the fact that the amount originally claimed was in Pakistani currency, Rs,6,24,180, but later the plaint was amended to claim Swiss Francs 159900. They were of the view that this amendment was obtained through misrepresentation as commission was not payable in Swiss Francs. In their view the commission was payable in Pakistan currency and that too at the rate prevailing on the date when payment fell due and was payable. They held, therefore, that the claim for Rs,6,24,180 amounted to an admission which the A.M.C. Could not be allowed to withdraw by seeking amendment in the plaint. It was thus that the learned Judges in the High Court concluded that the A.M.C. Was not entitled to anything more than Rs,6,241,80.
53. The law on the topic is Judge-made law. In view of acute inflation and in view of the fact that the situation as regards currency stability has substantially changed in recent times, in that "instead of the main world currencies being fixed and fairly stable in value, subject to the risk of periodic re: or devaluations, many of them are now "floating", i,e. They have no fixed exchange value even from day to day," (this is true of the Pakistani rupee also) this topic has recently engaged the attention of the Courts. Thus in re: United Railways of Havana and Regla Warehouses Ltd. (1961) A.C., 1007, it was held by the House of Lords of England that on a foreign currency claim, judgment could only be given in sterling, to which the foreign currency must be converted as at the date when the debt became due. The question was reconsidered by the House of Lords in "Millangos v. George Rank (Textiles) Ltd." 1976 AC 443). Incidentally in that case also the plaintiff claimed the amount of the price of the goods supplied in the sterling equivalent of the sum due in Swiss Francs as at the date when payment should have been made. At first the defendant contested this claim but then, just before the action was due to come on for trial it wrote to say that "it abandoned the defence and counterclaim and would submit to judgment". But in the meantime the Court of Appeal held in a case that the plaintiff in such a situation could claim a decree in foreign currency. Naturally the plaintiff, George Grank (Textiles) Ltd. Welcomed that decision and when the action came on for hearing on Deeember 2, 1974 it applied to amend its statement of claim so as to claim the amount due to it in Swiss Francs. This amendment was allowed by the trial Judge. Their. Lordships reconsidered the view taken in Havana Railwayscase and held that "justice demands that the creditor should not suffer from fluctuations in the value of sterling and that "the relevant certainty which the rule ought to achieve is that which given the creditor neither more nor less than he bargained for". The plaintiff, it was held, had bargained for 415,522.45 Swiss Francs and "whatever this means in (unstipulated) foreign currencies, whichever way the exchange into those currencies may go, he should get 415,522.45 Swiss Francs or as nearly as can be brought about".
These observations were made to repel the argument that the "breach dated" makes for certainty whereas'to choose a later date makes the claim depend on currency fluctuations. It was held further that there was no procedural difficulty in making an order for payment of foreign currency debts in foreign currency. In that behalf reference was made to the following form approved by the Court of Appeal: "It is adjudged that the defendant do pay to the plaintiff (the sum of foreign currency) or the sterling equivalent at the time of payment", As regards the conversion date to be inserted in the claim or in the judgment of the Court, the choice, it was observed, was between (i) the date of action brought, (ii) the date of judgment, (iii) the date of payment". It was held that "each has its advantages", but the date of payment "meaning, as I understand it, the date when the Court authorises enforcement of the judgment in terms of sterling" is the date which "gets nearest to securing to the creditor exactly what he bargained for". The date of action brought seemed to Lord Wilberforce (p. 469) to place he creditor too severely at the mercy of the debtor's obstructive defences... Or the law's delay". The date of judgment too, it was held, in some cases "particularly where there is an appeal, may again impose on the creditor a considerable currency risk". Thus the rule laid down in Havana Railwayscase was substituted by the new rule stated above because the new rule was.a more satisfactory rule, it avoided injustice, and it enabled "the law to keep in step with commercial needs and with the majority of other countries facing similar problems".
54. It seems to us that the learned Judges in the High Court had not their attention invited to the trend of the recent authority as reflected in George. Frank (Textiles) Ltd. Case which was followed by this Court in "Terni S.P.A. v. PECO (Pakistan Engineering Company) Ltd. (1992 SCMR 2238). In the latter case this Court noticed that "one strong reason for deviation from the old rule is the hectic fluctuations to which a currency is now subject". This Court held, therefore, that "justice demands that the creditor should not suffer from fluctuations in the value of the Pakistani rupee. If his contract is for a foreign currency and he has bargained for the same, he should get that currency and no other", and that the language of the decree in such cases "would give the judgment-debtor the option to either make payment in foreign currency or in Pak rupees, and execution can always be taken out by the decree-holder if no payment is made by the judgment-debtor in respect of so many Pak rupees as equal the foreign currency at the rate of exchange prevalent on the date the payment is made".
55. For these reasons we do not think that the learned Judges in the High Court were right in holding that the AMC was not entitled to claim the amount in foreign currency or that it was not entitled to more than Rs,6,24,180 under this head. Therefore, we would have decreed the AMC suit for Swiss Francs 159900 to be converted into Pakistani Currency at the date of the payment. We however find that by the High Court's order dated 29-11-1981 the entire amount decreed by the trial Court's judgment dated 31-5-1979 was ordered to be deposited "with the executing Court within two months" and that the amount so deposited was ordered to be "invested by the Court in the purchase of the Defence Saing Certificates". The High Court's order of that date went on to say that "the amount as well as the dividends accrued thereon shall be paid to the party succeeding in the appeal". Learned counsel for the AMC stated at the bar of this Court that the High Court's order dated 29-11-1981 was duly complied with and the amount decreed by the trial Court was deposited and then duly invested in terms of that order. Learned counsel for the petitioner, therefore, did not insist upon a decree for Swiss Francs 159900 to be converted into Pakistani Currency at the date of the payment.
56. That brings us to the last item under the head "damages". The learned Civil Judge allowed under that head a sum of Rs,12,36,350 but the learned Judges in the High Court disallowed that sum. Though, we have held that time was not of the essence of the contract and the Federation was not entitled to avoid the contract and also that in view of the modification in the terms of the contract in two material respects, the AMC was entitled to a reasonable extension of time, we have held also that "it was the duty of the AMC. To have made a formal application for the extension of time specifying the exact period for extension on the grounds which they could sustain legally, which they failed to do so", that there is no doubt that "the performance of AMC was not commendable" and that "within the contract period, it was able to complete the formulation work to the extent of 206 metric tons against the total of the contracted quantity of 3000 metric tones, which comes to about 6 or 7 per cent. The heavy burden was on them to justify the delay of each day". In view of these findings we have to do a balancing exercise and in determining the Federation's liability to damages, set the Federation's breach of obligation against the AMC's performance. Having so considered the matter, we do not think that the AMC was entitled to damages. The principles for the assessment of damages is compensation and keeping that principle and the objective appraisal by the High Court of the parties evidence, with which we are unable to find any fault, in mind, we agree with the learned Judges in the High Court that the AMC's claim to damages, Rs,12,36,350.00, was not entitled to succeed.
57. For these reasons Civil Appeal No, 171 of 1993 is partly accepted. The judgment and the decree of the High Court dated 10-1-1993 in so far as a decree for Rs,3,39,199 with interest and for Rs,9,13,029.00 was disallowed, are set aside and the decree of the learned trial Judge for payment of Rs,3,39,199 (but without interest) is restored and in view of the concession made by the learned counsel for the appellant at the bar of this Court the decree of the trial Court for the recovery of Rs,9,13,029 on account of commission, is also restored and it is ordered that the Defence Saving Certificates worth Rs,12,52,228 as invested under the High Court's order dated 29-11-1981 with dividends accrued on the Defence Saving Certificates worth that sum shall be paid to the AMC. The judgment and the decree of the High Court in so far as they disallowed the sum of Rs,12,36,350 on account of damages are maintained. The remaining Defence Saving Certificates alongwith the dividends accrued thereon shall be paid to the Government of Pakistan, respondent No,1 herein.
The parties are left to bear their own costs.
CIVIL APPEAL NO. 172 OF 1993:
58. This appeal, as has been observed, arises out of Suit No, 126 of 1978 instituted by the AMC against the Federation for the recovery of Rs,11,77,818 equal to 222490 Swiss Francs. This suit related to the charges incurred by the Sandoz on air lifting the technical material from Switzerland to Karachi. It has been noticed that intern No, 10 of Appendix 2 to the contract provided, among others, that payment of 100% of the total FOB value plus Air freight at actuals but not exceeding the amount prescribed in the schedule to the contract was to be paid according to the quantity actually despatched through a confirmed and irrevocable letter of credit to be opened by the Assistant Director Accounts. The amount prescribed in the schedule to the contract was Swiss Francs 1977690. It was the AMC's case that this amount was based on the net rate of technical material viz. 390 MT and that in specifying that amount, account was not taken of the net weight of the packing material in which the technical material was contained. According to the AMC, the air- freight, unlike the sea-freight, is to be paid on the gross weight including the packing, and the total air-freight for transporting 390 MT from Switzerland to Pakistan of the technical material incurred by the Sandoz was Swiss Francs 2200180. It was stated that the letter of credit opened by the Federation was for Rs,1977690 for the air-freight, although the Sandoz had incurred Swiss Francs 2200180: It was claimed, therefore, that the Sandoz was entitled to Swiss Francs 222490 at the exchange rate prevailing at the time of recovery with interest from the date of the suit.
59. The. Federation contested the suit on various grounds. On the crucial question, whether it was liable to pay Swiss Francs 2200180 or 1977690 only, it pleaded that the terms of the contract expressly provided for the latter sum and the AMC was not, therefore, entitled to the difference.
60. The learned Civil Judge decreed the suit vide his judgment dated 31-5-1979, holding that the gross weight of the consignment was 433.875 metric tons and that admittedly the air-freight had been paid in respect of 390 M.T. Only. The learned Civil Judge also relied upon the Federation's letter (Exh.P1) dated 17-11-1977. In the view of the learned Civil Judge, the AMC was entitled to the amount in question because no person can unjustly enrich himself due to mistake whether wanton or otherwise made by him in the course of dealing by him with another. The mistake in the view of the learned Civil Judge was that the weight of the containers was not taken into account when calculating the sum of Swiss Francs 19,77,690. The mistake so held the learned Civil Judge was mutual.
61. On the Federation's appeal, the learned Judges in the High Court observed that the first question to ask was whether "either of the party was suffering from any mutual mistake of fact while making relevant entries in the contract Exh.D/2 and if it is so what is its effect? And that the second question was "as to what is the actual amount of air-freight paid by M/s. Sandoz Limited to the air company as air-freight for contracted material". As regards the letter (Exh.P-1) the learned Judges observed, and rightly in our view, that it contained no admission of the fact that the Federation was liable to pay 2200180 Swiss Francs on account of air-freight. That letter was from the Accounts Officer, Federal Directorate of Fertilizer Import, Government of Pakistan to the Manager, National Bank of Pakistan saying that the payment against the letter of credit could not be made by the Directorate as the funds of the Government of the Punjab were not available with it and that the same would be passed on the availability of the funds from the Government of the Punjab. The liability to pay if any was that of the Federation; in any case, the real import of the letter was that the funds were not available
62. The learned Judges in the High Court then referred to letters (Exh.P-6) and (Exh.P-7) both of the date 7-4-1977 which gave the rate of air-freight as Swiss Francs 5071 per M.T.; to letter (Exh.P-8) dated 10-5-1977 whereby the Sandoz sought amendment in the contract saying that the freight of 1950 drums containing 390 MT of the technical material would be 433.875 M.T. By letter (Exh.P-9) dated 20-6-1977, the Sandoz claimed the sum of Swiss Francs 222490.30. To the same effect were the letters (Exh.P-10) and (Exh.P22). The rate of air-freight quoted in these documents was Swiss Francs 5071 per M.T. And it was said that he cost of lifting 433:875 MTs would come to 2200180 Swiss Francs. The learned Judges also noticed the airway bills (Exh.D-5/1) to (Exh.D/5-12) which evidenced the fact that 1950 drums carrying 433.875 M.T. Of the material were air-lifted on various dates, with this difference that in the airway bills the rate of freight was mentioned to be Swiss Francs 6.20 per kilogram. Those documents showed further that except the consignment evidenced by Exh.D-5/3, in all other consignments 171 drums carrying material having gross weight of 38047.05 KGs were air-lifted at the rate of Swiss Francs 6.20 per KG while under Exh.D-5/3, 69 drums having total gross weight of 15352.05 KGs at the rate of Swiss Francs 6.20 per KG were air- lifted. Further in the airway bills Exh.D-5/1 to D-5/2 rebate to the extent of Swiss Francs 62466.30 was allowed for each consignment of 171 drums but in the airway bills Exh.D-5/4 to D-5/12, the rebate given on each consignment was only of Swiss Francs 42955 though the material lifted was of the same quantity, that is, 171 drums. The learned Judges were, therefore, of the view and we are in complete agreement with them, that "if the rebate had been allowed at the same rate as was allowed originally in the first two consignments, the amount charged for 12 consignments would have been S.Fr.
1977690.30" and that "the rate per kilogram given in the airway bills is S.Fr.
6.20 per KG as against 5.07 S.Fr. And accordingly mentioned in the contract document Exh.D-2". The learned Judges, therefore, concluded that if the air-freight at the rate of S.Fr. 5-07 per KG had been paid the total amount would naturally be the agreed amount, that is, S.Fr.1977690.00. There was no explanation, so observed the learned Judge and none was given before us either, as to why as against the quoted rate of S.Fr.
5.07, the airway bills gave the rate as S.Fr.
6.20 per KG and as to why the rebate originally allowed as per Exh.D-5/1 to D-5/3 was reduced in the other airway bills Exh.D-5/4 to Exh.D-5/12. The learned Judges also noticed and in our view rightly that in the documents Exh.D-5/1 to D-5/12 the amount actually paid had not been mentioned and there was, therefore, no evidence whatsoever of the amount actually paid by Sandoz to the Bal-Air (that being the name of the Airline which air-lifted the material). Thus there was no evidence to establish the amount which was actually paid as air-freight to the Airline. The learned Judges in the High Court, therefore, held that the AMC's plea that the mention of Swiss Francs 19,77,690 in the schedule to the contract was the result of a material mistake could not be accepted.
63. The learned Judges then referred to the relevant clauses in the contract document and observed that the AMC's plea that gross weight of 433.875 MT calculated at the rate of 5.07 per KG comes to S.Fr.
2200200.40 could not be accepted because the rate given in the airway bills was not S.Fr.5.07 but was S.Fr.6.20 per KG, and the Managing Director of the AMC was also wrong in his assertion, so observed the learned Judges, that no rebate was allowed because if that were so then the total amount which should have been paid at S.Fr.6.20 per KG for 433.879 MT would have been 2690049.80 and not the sum of 2200180 Swiss Francs as claimed by the plaintiff. The amount payable for 433.879 MT at the rate of 5.07 comes to S.Fr.
2200200.40 and if the rebate which is allowed, that is, S.Fr.489844.70 is deducted then the net amount payable comes to S.Fr.1710356. As against that the amount admittedly received was S.Fr.1977690 and thus a sum of S.Fr.267334 was received in excess".
64. So conclusively and logically convincing are these findings and the reasons Which supported them, and so completely are we in agreement with them that we should be content to adopt them.
The parties must have intended what they actually said in clause 3(b) of Appendix 2 to the contract deed namely that the air-freight was payable at actuals but not exceeding the amount given in the schedule to the contract. Admittedly the amount given in the schedule 1977690 Swiss Francs, has been paid. In specifying that amount in the contract deed itself, the parties must be presumed to have known that the air-freight would be charged at the gross rate, viz. 433.875 MT and not at 390 MT. It may well be that Sandoz had in mind the rebate which the Airline would allow it. Further the rate mentioned in the contract deed was 5.07 Swiss Francs per KG. But as has been noticed above, some of the documents showed that the air-freight was actually charged at the rate of S.Fr.
6.20 per KG. Then the AMC failed to place on record any document to show that it had actually paid 2200180 Swiss Francs as air-freight.
65. For these reasons we find no merit in the appeal and dismiss it but leave the parties to bear their own costs.