Whether damages can be granted in respect of immovable property as per S73 of contract Act?

It appears to me that the Courts in India are bound to apply the express provision of law embodied in Section 73, Contract Act, to the exclusion of any rule of English Common law; the more so when, as in this particular instance, it is regarded by English authorities themselves as anomalous and exceptional justified only by the peculiar conditions of English titles and conveyancing. There is nothing in Section 73 to restrict its application to contracts relating to movable property only; nor does it lay down any different measure of damages in respect of a breach of a contract relating to movable property as distinguished from those affecting immovable property. It only lays down a general rule 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, of which the parties knew, when they made the contract, to be likely to result from the breach of it. The wording is comprehensive enough to include contracts respecting immovable property. As observed in Ranchhod v. Manmohandas (1908) 32 Bom 165 it imposes no exception on the ordinary law as to damages; whatever the subject-matter of the contract may be. It must therefore follow that in cases of breach of contract for sale of an immovable property by reason of the vendor's inability to make out a good title, the damages must be assessed on the principle stated in Section 73, Contract Act.

 The next question is whether, applying Section 73, Contract Act, the vendee is entitled to claim damages for the loss of his bargain. In the present case it is found that the vendee was aware of the vendor's defective title on the day of the contract of sale. On the assurance of the vendor that he would convey a sound title within eight days, the vendee advanced him Rs. 125 as earnest money out of the purchase money settled. The fact that the vendee was aware of the vendor's defective title cannot affect the validity of the contract which was to be performed not on the day on which admittedly the vendor had no title, but on some other day on which he expected to acquire a marketable title. The contract of sale which involved representation by the vendor that he would perform his part of the contract on a particular day created expectations in the mind of the vendee that he would get marketable title. The vendor was therefore bound in law either to fulfil his promise or compensate the promisee for the loss of the right he expected to acquire. That loss would obviously be estimated on the basis of the difference between the contract price and the market price on the day of the breach, as has been done by the Court below. As the vendor himself had agreed to pay the damages to the extent of Rs. 400 which has been found not to exceed the difference between the contract price and the market price at the date of the breach he was bound to reimburse the vendee by payment of, that stipulated amount. I affirm the lower appellate Court's decree and dismiss this appeal with costs.

IN THE HIGH COURT OF NAGPUR

Decided On: 19.06.1933

Appellants: Sakharam Tukaram Kunbi
Vs.
Respondent: Jairam Januji

Niyogi, A.J.C.

Citation: AIR1933Nag263

1. This appeal arises out of a suit for recovering damages arising out of breach of a contract of sale entered into on 21st September 1928 by the defendant Sakharam in favour of the plaintiff Jairam. The suit was dismissed in the Court of first instance, but was decreed in appeal. The defendant has therefore preferred this appeal.

2. The contract of sale was made with reference to fields Survey Nos. 65 and 32/2 of Dhotra for Rs. 1,875 out of which Rs. 125 were paid as earnest money. On the day of the contract the fields had already been finally foreclosed and the vendor had ceased to have any title to it. Both the Courts below have concurrently found that the vendee, namely, the plaintiff, was aware of the fact that the vendor's title was extinguished by the final decree for foreclosure. The lower appellate Court awarded damages to the plaintiff in accordance with Section 73, Contract Act. He ordered refund of the earnest money amounting to Rs. 125 and in addition granted damages to the extent of Rs. 400" and passed a decree for Rs. 525. On behalf of the appellant it is contended that the vendor was not liable to pay damages for the loss of the bargain, although it is conceded that he was bound to refund the amount of earnest money which he had received. Reliance is placed on the ruling reported in Dhanrajgirji Narsinggirji v. Tata Sons Ltd. AIR 1924 Bom 473. In that case it was held that although Section 73, Contract Act, was applicable to the contracts respecting immovable property as to those relating to goods, still the rule of English law laid down in Bain, v. Fothergill (1874) 7 HL 158 was not necessarily excluded by the terms of Section 73, Contract Act. On the question of the applicability of that rule the judicial opinion in India is not unanimous. The rule is this: if a person enters into a contract of sale of real estate knowing that he has no title to it, nor any means of acquiring it, the purchaser cannot recover damages beyond the expenses he has incurred by an action for the breach of the contract. He can only obtain other damages by an action for deceit. The same rule was stated in other word's by Kay, J., in Gaslight & Coke Co. v. Towse (1887) 35 Ch D 519 as follows: ''If he (meaning the person in whose favour a trustee who leaped the trust property for 30 years with a covenant for renewal for another like term) enters into it knowing exactly what the title of his vendor is, and that the carrying out of the contract eventually is subject to a possible difficulty, how can he turn round and say: 'although, I entered into that contract with you knowing of that difficulty, still I hold you liable for damages'."

3. The rule stated in Bain v. Fothergill (1874) 7 HL 158 was only an affirmation of the principle enunciated in Flureau v. Thorn hill (1776) 2 W Bl 1078. That rule is regarded in England as exceptional "and anomalous, as pointed out by Fry, J., in his book on Specific Performance, Edn. 6, p. 607 and has been applied mainly because of the peculiar complexities of titles to immovable property and the difficulties of conveyancing. In India it was no doubt applied in Pitambar Sundarji v. Cassibai (1887) 11 Bom 272, but in Nagardas Saubhagyadas v. Ahmadhhan (1897) 21 Bom 175, Jai Kishen Das v. Arya Priti Nidhi Sabha AIR 1920 Lah 297, Banchhod v. Manmohandas (1908) 32 Bom 165, Nabin Chandra Saha Paramanick v. Krishna Barana Dasi (1911) 38 Cal 458 and Adikesavan Naidu v. Gurunatha Chetti (1917) 40 Mad 338, the Judges declined to follow the rule to the exclusion of the law expressly laid down in Section 73, Contract Act. The question was exhaustively considered by a "Full Bench in the case reported in Adikesavan Naidu v. Gurunatha Chetti(1917) 40 Mad 338. It appears to me that the Courts in India are bound to apply the express provision of law embodied in Section 73, Contract Act, to the exclusion of any rule of English Common law; the more so when, as in this particular instance, it is regarded by English authorities themselves as anomalous and exceptional justified only by the peculiar conditions of English titles and conveyancing. There is nothing in Section 73 to restrict its application to contracts relating to movable property only; nor does it lay down any different measure of damages in respect of a breach of a contract relating to movable property as distinguished from those affecting immovable property. It only lays down a general rule 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, of which the parties knew, when they made the contract, to be likely to result from the breach of it. The wording is comprehensive enough to include contracts respecting immovable property. As observed in Ranchhod v. Manmohandas (1908) 32 Bom 165 it imposes no exception on the ordinary law as to damages; whatever the subject-matter of the contract may be. It must therefore follow that in cases of breach of contract for sale of an immovable property by reason of the vendor's inability to make out a good title, the damages must be assessed on the principle stated in Section 73, Contract Act.

4. The next question is whether, applying Section 73, Contract Act, the vendee is entitled to claim damages for the loss of his bargain. In the present case it is found that the vendee was aware of the vendor's defective title on the day of the contract of sale. On the assurance of the vendor that he would convey a sound title within eight days, the vendee advanced him Rs. 125 as earnest money out of the purchase money settled. The fact that the vendee was aware of the vendor's defective title cannot affect the validity of the contract which was to be performed not on the day on which admittedly the vendor had no title, but on some other day on which he expected to acquire a marketable title. The contract of sale which involved representation by the vendor that he would perform his part of the contract on a particular day created expectations in the mind of the vendee that he would get marketable title. The vendor was therefore bound in law either to fulfil his promise or compensate the promisee for the loss of the right he expected to acquire. That loss would obviously be estimated on the basis of the difference between the contract price and the market price on the day of the breach, as has been done by the Court below. As the vendor himself had agreed to pay the damages to the extent of Rs. 400 which has been found not to exceed the difference between the contract price and the market price at the date of the breach he was bound to reimburse the vendee by payment of, that stipulated amount. I affirm the lower appellate Court's decree and dismiss this appeal with costs.