Alopi Parshad & Sons Ltd v. Union of India

Alopi Parshad & Sons Ltd v. Union of India

AIR 1960 SC 588

(Section 56, Frustration, quantum meriut, Section 62)

FACTS:

Plaintiffs were appointed by UoI to provide for the army personnel ghee in return for consideration as stipulated under contract. World War II then started and after three years, government in light of increased demand for ghee varied the original agreement by mutual consent under which the original price consideration was substituted by decreased price. After one year, plaintiffs demanded sale consideration of goods be enhanced in view of increasingly onerous discharge of their obligations followed by assurance by government that it “might be entertained”. Plaintiffs continued the supply but the ‘assurance’ was never acted on.

ISSUES:

1) Whether original contract needed to be enforced w.r.t. price as stipulated therein or in view of mutual variation by parties, consideration as paid by government as according to substituted price was valid and subsisting?

2) Whether the contract had become impossible to perform in light of increasingly onerous discharge of obligations by the plaintiffs never contemplated by them while entering into it?

3) Whether the obligation of government to pay the sale price must be determined by contract or in light of non-contemplated circumstantial change leading to onerous discharge of sale by plaintiffs, claim for quantum meriut be entertained?

HELD:

1) When an agreement is altered mutually (S.62) then obligations as under original contract w.r.t. thereof are no longer required to be performed by the parties. In present case, the effect of mutual alteration in original agreement w.r.t. price of goods supplied was that govt. was now bound to pay the agreed decreased price and not the price which was stipulated earlier in original contract. Though plaintiffs incurred losses but they received the consideration as stipulated in altered agreement; hence, no action for additional payment lies thereof.

Further the contention of plaintiffs that in light of assurances by the government, latter was estopped to go back on it, cannot hold well for vague assurances don’t modify contract and nor can be invoked to have a cause of action in respect of promissory estoppel for it was never intended to be legally binding.

2)  S.56 (Impossibility to perform):  If a consideration of the terms of the contract, in the light of the circumstances in which it was made reveal that parties never agreed to be bound in a fundamentally different situation now unexpectantly emerged, the contract ceases to operate- not because it is just and reasonable to qualify the terms but because on its true construction, it doesn’t apply in that situation.

There is nothing in Indian law which justifies the view that a change of circumstances ‘completely outside the contemplation of parties’ from the time when the contract was made will justify a Court to absolve a party from express terms thereof. A contract isn’t frustrated merely because of change in circumstances. Therefore rather than ‘intention of the parties, as reasonable men’, focus should be on ‘true interpretation of contract.’

Parties to an executory contract are often faced with the turn of events that they never contemplated of-a wholly abnormal rise or fall in prices, sudden depreciation of currency which can make the onus to discharge obligations more onerous but do not completely render them to be impossible to perform. In such circumstances, this change of events doesn’t affect the bargain which parties had made.

Therefore the contention of plaintiffs that “turn of events were never in the contemplation of parties”, hence, original contract wasn’t binding, was unsupportable by law. Further, it was untrue in fact also for after three years of WWII had been already started was the mutual alteration in original contract brought about, such that parties were fully aware as to the altered circumstances. Further, contract was never rendered impossible or unlawful u/s 56 as it was duly performed by plaintiffs and they received remuneration by govt. expressly stipulated to be paid thereunder.

3) Quantum Meriut is but a reasonable compensation awarded on implication of a contract to remunerate, and an express stipulation governing the relations between the parties under the contract, cannot be displaced by assuming that such stipulation isn’t reasonable. When work is done pursuant to terms of the contract, if compensation was fixed thereunder, quantum meriut restitutionary claim doesn’t lie.

Since in present case, the contract had been duly performed by both the parties, as according to the express terms of the contract, no dispute as to any additional or reasonable payment for any obligation discharged can lie and plaintiffs appeal is dismissed.

 

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)