Murlidhar Chiranjilal v. Harishchandra Dwarkadas

Facts

Both parties were Kanpur traders. Chiranjilal contracted to sell canvas to Dwarkadas, deliverable by railway receipt for Calcutta (goods to be railed Kanpur-to-Calcutta, transport and labour borne by the buyer), the receipt to be dated 5 August 1947. Chiranjilal failed to deliver and on 8 August informed the buyer that booking from Kanpur to Calcutta was closed. Dwarkadas claimed as damages the difference based on the higher Calcutta market rate of canvas around the date of breach.

Issues

• Whether damages should be measured by the market price at Kanpur (place of breach) or at Calcutta (intended destination).
• What the buyer must prove to recover damages for the seller's non-delivery.

Arguments

The seller argued the relevant price was the Kanpur market price, as the buyer's duty was to buy substitute canvas at Kanpur and rail it to Calcutta. The buyer argued the contract showed the goods were for Calcutta, so the higher Calcutta price was the contemplated measure of loss under the second limb of Section 73.

Held

The Supreme Court applied two settled principles flowing from Section 73 and its Explanation: the injured party is to be put, so far as money can, in the position as if the contract had been performed; but this is qualified by the duty to mitigate, debarring recovery of loss due to neglect to mitigate. As this was an ordinary f.o.r. Kanpur contract for goods bought for re-sale anywhere, the parties did not know the goods were meant for sale in Calcutta alone, so the second limb did not apply. The measure was the Kanpur market rate on the date of breach. Because the buyer failed to prove that rate, no damages were awarded.

Ratio decidendi

For a seller's non-delivery, the measure of damages is the difference between the contract price and the market price of similar goods at the place of delivery on the date of breach; the buyer must take reasonable steps to mitigate and bears the burden of proving the relevant market rate.

Significance

Leading Indian Supreme Court authority on the measure of damages and the duty to mitigate under Section 73. It firmly establishes the market-price/breach-date rule for sale-of-goods breaches and the principle that failure to prove the relevant market rate defeats a damages claim. Distinguishes the two limbs of Section 73 (natural loss vs. contemplated loss).

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