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TMI Blog1969 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... with any demand or requisition or in any other way fail to. perform or observe any condition of the contract. (v) (vi) In ease of such rescission, my/our security deposit (or such portion thereof as the officer sanctioning the contract shall consider fit or adequate) shall stand forfeited and be absolutely at the disposal of Government, without prejudice to any other remedy or action that the Government may have to take. In the case of such rescission, the Government shall be entitled to recover from me/us on demand any extra expense the Government may be put to in obtaining supplies/services hereby agreed to be supplied, from elsewhere in any manner mentioned in clause 7(ii) hereof, for the remainder of the period for which this contract was entered into, without prejudice to any other remedy the Government may have." The plaintiff having made persistent default in making "regular and full supplies" of the commodities agreed to be supplied, the Government of India rescinded the contracts the first on November 23, 1947, and the second on December 2,1947, and forfeited the amounts deposited by the plaintiff. The plaintiff commenced an action against the Union of India in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of contract everyday with great inconvenience," and in the circumstances the Court "could take judicial notice of the fact that 1947-48 was the period when the prices were rising and it would not have been easy to procure the supplies at the rates contracted for". The High Court concluded: " ...... taking into consideration the amount of inconvenience and the difficulties and the rising rate of prices, it would not be unfair if in case of such breach for the supply of such huge amounts of potatoes and poultry, we consider an amount of Rs. 18,500/.-by way of damages as being not unreasonable." Under the terms of the agreements the amounts deposited by the plaintiff as security for due performance of the contracts were to stand forfeited in case the plaintiff neglected to perform his part of the contract. The High Court observed that the deposits so made may be regarded as earnest money. But that view cannot be accepted. According to Earl Jowitt in "The Dictionary of English Law" at p. 689: "Giving an earnest or earnest-money is a mode of signifying assent to a contract of sale or the like, by giving to the vendor a nominal sum (e.g. a shilling) as a token that the parties are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by some of the High Courts in India, that s. 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases whereupon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression "the contract contains any other stipulation by way of penalty" comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by s. 74. In all cases,. there fore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable but not exceeding the amount spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther or not actual damage or loss is proved to have been caused thereby" is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine preestimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him. In the present case, it was possible for the Government of India to lead evidence to prove the rates at which potatoes, poultry, eggs and fish were purchased by them when the plaintiff failed to deliver "regularly and fully" the quantities stipulated under the terms of the contracts and after the contracts were terminated. They could have proved the rates at which they had to be purchased and also the other incidental charges incurred by them in procuring the g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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