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Judgment
Spencer, J.—The appellants, who belong to a trading family, contracted to purchase from the respondents, ""a similar firm, 50 bales of yarn
manufactured by the Madura Mills and actually took delivery of 6 bales. Owing to a fall in prices in the market the appellants were unwilling to
receive the remaining 44 bales on the terms agreed upon. The contract was thereupon cancelled on the condition that appellants paid Rs. 5,000 to
the respondents to make good their losses upon their contract with the Mills. These Rs. 5,000 were included in a larger sum of Rs. 10,800 which
represented the aggregate amount found to be owing by the appellants to the respondents on a settlement of accounts made on February 2nd
1919, and an unconditional promise to pay Rs. 10,800 to respondents order on demand was written in the appellant''s ledger. (Ex. A.) kept by the
respondents and was signed by the appellants.
At the trial in the Sub Court the appellants sought to prove by oral evidence that there was a contemporaneous agreement, that in the event of
the Mills consenting to cancel their contract with the respondents, the appellants should be excused from their liability to pay Rs. 5000 to the
respondents.
The Subordinate Judge refused to admit such evidence, holding that to do so would be tantamount to admitting parol evidence of an agreement
in defeasance of the written contract contained in Ex. A which was an unconditional contract to pay Rs. 5,000 on demand.
He held that the evidence sought to be admitted was made inadmissible by Section 92 of the Indian Evidence Act. He further held that the letter
(Ex. II) written on the same date as the promise to pay in Ex. A did not amount to a written agreement varying the terms of the first agreement.
Mr. Ananthakrishna Iyer argued that the evidence that was excluded was evidence of a separate oral agreement as to a matter on which Ex. A
was silent and which was not inconsistent with its terms. He drew our attention to the case of Matabhoy Mull a Essabhoy v. Mulji Haridas 28
M.L.J. 589 as being an instance of the application of proviso (2) of Section 92. Their Lordships of the Privy Council in that case went into the
evidence observing that it would not be satisfactory to decide against the defendant on a view which might have been obviated by a mere
amendment of the pleadings. So in this case, I have considered whether if the respondents'' suit had not been based on the accounts but had been
brought to recover damages on account of the appellant''s breach of contract in respect of the 44 bales which they refused to receive, it would
have been open to them to plead in mitigation of the damages due upon their breach of contract that the respondents had not suffered to the extent
claimed by them owing to the Madura Mills having '' excused them from their liability to receive the remaining bales from the Mills. After full
consideration 1 have come to the conclusion that the result would be the same. When the promise in Ex. A to pay Rs. 10,800 to respondents''
order on demand was signed, there was an unconditional agreement to pay Rs. 5000 as liquidated damages for the cancellation of the order for the
remaining 44 bales. No doubt Ex. A is not a very formal document and there are no calculations to show how the figure Rs. 5000 was arrived at.
But on the strength of the promise to pay on demand, the respondents might have called on the appellants to pay the. Sum of Rs. 10,800 the next
minute after they had signed Ex. A, and it would then have been inconsistent with the unconditional nature of that promise to set up a
contemporaneous undertaking that the respondent would repay the sum of Rs. 5000 paid as compensation in the event of of the Mills allowing
them to countermand their order, as to do so would be to destroy the finality of the settlement then made which was irrespective of the
respondent''s liability to the mills. In the Respondents'' letter Ex. I there is no acceptance '' of the proposal in Ex II that the compensation should be
returned if the Mills were prepared to cancel the order for bales of quality Nos. 50 and 44. In Matabhoy Mulla Essabhoy v. Mulji Haridas I.L.R.
(1915) 39 Bom. 399 the separate oral agreement that the money paid on December 23rd 1907 should be treated as a prepayment in lieu of the
advance due on January 30th 1908, and that in satisfaction of the promissory note of December 23rd the payee should give the holder an
acknowledgment of the receipt of the instalment due on the later date was held to be an agreement which could be proved under proviso (2) to
Section 92. There the oral agreement was quite distinct from the agreement under the promissory note and not inconsistent with it. The facts of the
case before us are more analogous to those in Hitchings and Choulthurst Company v. Northern Leather Company of America and Doushkess
(1914) 3 K.B. 907 where Bailhache, J. held that an ""oral agreement that the defendant would not pay if the goods supplied to his Company should
be unequal to sample was an agreement in defeasance of the contract to pay contained in the promissory note, and evidence to prove it was
inadmissible.
In Ramjibun Serowgy v. Oghore Nath Chutterjee ILR (1897) Cal. 401 there was an attempt to set up an oral agreement restricting the absolute
engagement in a promissory ''note to pay on demand and to bring it under proviso (3) which relates to agreements constituting a condition
precedent to the attaching of an obligation under the contract, and it was ruled out as being an agreement to postpone the legal obligation to
perform a promise which was absolute in its terms.
Although the alleged agreemet in the present case not to enforce the absolute promise to pay on demand is not put forward as a condition
precedent to the attaching of the obligation to pay, it is an agreement which would have the effect of converting an absolute unconditional promise
into a conditional defeasible one.
The other cases cited in the arguments are not of much assitance. Goseti Subba Rao v. Varigonda Narasitnham ILR (1903) Mad. 368 is an
authority on the application of proviso (4). Jnanendra Mohan Chaudhury v. Gopal Das Chowdhury (1901) 8 Cal. W.N. 923 is an authority on
Section 91 Kamala Sahai v. Babu Nundan Mian (1909) 11 Cal. L.J. 39 deals with an agreement dehors Section 92 altogether, as it provided for
the discharge ,of a debt secured by a mortgage deed by means of putting the mortgagee in possession and letting him enjoy the profits of the
mortgaged property. Jagatnand Misscr v. Nergan Singh ILR (1881) Cal. 433 simply laid down that evidence of part performance of a contract
negatived a plea, that there was an oral agreement constituting a condition precedent to the contract becoming enforceable.
I think that the appellants'' contentions are not acceptable and that the appeal should be dismissed with costs.
Sudasiva Iyer, J.
I entirely agree both with the conclusion of my learned brother and with his reasons for arriving at that conclusion.