Khardah Company Ltd. v. Raymon & Co. (India) Private, Ltd.

Khardah Company Ltd. v. Raymon & Co. (India) Private Ltd.

AIR 1962 SC 1810

(Assignment)

FACTS:

Defendant entered into a contract for supply of goods to plaintiff, from Pakistan to India; however a notification was issued by Central Govt., prior to formation of above mentioned agreement, which made all forward contracts for sale-purchase of those goods except non-transferable specific delivery contracts (i.e. those contracts under which rights or liabilities are not transferable) as illegal. Plaintiff filed a suit alleging default of defendants by not supplying the goods.

ISSUES: 

Whether the impugned contract was non-transferable specific delivery contract and hence valid and subsisting between the parties?

Sub-Issue:  Are the buyers entitled to assign their right to get the goods on payment of price? Are the sellers entitled to assign their right to receive payment on delivery of the goods?

HELD:

Obligations under a contract cannot be assigned except with the consent of other party and when such consent is given it is really a novation resulting in substitution of liabilities. (S.62) Rights under a contract are assignable, even without the consent of other party, unless the contract is personal in its nature, or rights are incapable of assignment either under law or expressly or impliedly under the agreement between the parties. Not only the express provisions but also the implied intention of the parties from the construction of whole contract along with surrounding circumstances need to be taken into account while determining whether parties intended contract to be assignable.

In contracts for sale and purchase of goods, there is nothing personal such that the rights thereunder are assignable unless contrary intention appears from the agreement between the parties or such assignment is expressly prohibited by law.

There is a clear distinction between assignment of rights under a `contract by a party who has performed his obligations there under and assignment of claim for compensation which one party has against the other for breach of contract. Latter is mere claim for damages which cannot be assigned while former is benefit under an agreement capable of assignment.

The license which authorized plaintiffs to import the goods from Pakistan expressly prohibited them from assigning the same. Further, goods so received couldn’t be sold to any other party but were to be utilized for manufacturing in license holder’s factory. Hence, clearly the right of plaintiffs to receive the goods couldn’t be assigned. Under the same license, on application by plaintiff, letter of authority to deliver the goods to the former was issued in name of defendant. Further, Court construed the intention of the parties from the express provisions of the contract making the contract non-transferrable.

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