Radhakrishna Sivadutta Rai And Ors vs Tayeballi Dawoodbeai

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 212 of 1959

Decision Date: 13 October, 1961

Coram: P.B. Gajendragadkar, Bhuvneshwar P. Sinha, Raghubar Dayal

In this case the Court recorded that the matter involved a suit filed by the appellant for damages for breach of contract against the respondent. The appellant was Radhakrishna Sivadutta Rai and others; the respondent was Tayeballi Dawoodbeai. The judgment was delivered on 13 October 1961 by a bench consisting of P B Gajendragadkar, Bhuvneshwar P Sinha and Raghubar Dayal, and is reported in 1962 AIR 538 and 1962 SCR Supl. (1) 81. The respondent pleaded that the appellant had contracted only as an agent for a disclosed principal and therefore had no right to sue. The broker‑issued bought‑and‑sold notes indicated that the contract had been entered into on behalf of the disclosed principal, yet the confirmation slips and subsequent letters exchanged between the parties contained no reference to that principal and the appellants did not describe themselves as acting for him. The Court held that it is well established in commercial usage that when broker‑issued bought‑and‑sold notes are identical and contain no material variation, they constitute the contract that must bind the parties. Where such notes show material differences, neither one nor both taken together can be relied upon to prove the contract terms. In the instant case the two notes were identical and specifically mentioned the appellants as acting on account of the disclosed partner; consequently the Court concluded that the appellants had entered into the contract on behalf of the disclosed partner and thus were not entitled to sue. The Court referred to several authorities, including Cowie v Ramfry (1846) 3 Moo I A 448, Sievewright v Archibald (1851) 117 ER 1221, Ah Shain Shoke v Moothia Chetty (1899) LR 27 IA 30 and Gadd v Houghton (1876) I Ex D 357. It further observed that, in deciding whether an agent entered into a contract for the principal, the manner of signing must be considered in the light of the recitals in the relevant document. Accordingly, the letters and confirmation slips had to be read together with the bought‑and‑sold notes and presumed consistent with them; it would be unreasonable to attach undue importance to the signature or how the parties described themselves. The judgment concerned Civil Appeal No 212 of 1959, an appeal from a decree dated 1 March 1957 of the Calcutta High Court, which itself was an appeal from original decree No 71 of 1954. Counsel for the appellants were G S Pathak and Naunit Lal; counsel for the respondent was A V Viswanatha Sastri, S N.

Andley, Rameshwar Nath and P. L. Vohra appeared for the respondent. The judgment was delivered on 13 October 1961 by Justice Gajendragadkar. The appeal, which was taken on a certificate granted by the Calcutta High Court, arose from a suit filed by three appellants seeking recovery of Rs 83,640. The appellants were the firm Radhakrishan Shivdutt Rai, which carried on business at Banaras, Ram Kumar Lal who sued in his individual capacity and also as karta of his joint family, and Madan Gopal who likewise sued in his individual capacity and as karta of his joint family. The latter two were partners in the first‑named firm; for convenience the partnership firm is referred to as the appellant. The respondent was the partnership firm Tayeballi Dawoodbhai, which conducted its business in Calcutta.

The appellant asserted that a contract had been concluded between it and the respondent on 18 December 1950 through the brokers T N Mehrotra & Co., Calcutta. The contract was subsequently confirmed by two letters, one dated 3 January 1951 and the other dated 15 January 1951, written by the appellant to the respondent and replied to by the respondent. Under that contract the respondent agreed to sell one thousand bales of Banaras hemp, the particulars of which were set out in the plaint. The appellant further claimed that, by a letter dated 14 March 1951, it accepted delivery, as part performance of the contract, of one hundred ten bales of Banaras hemp No. 1 and fifty bales of Banaras hemp No. 2. The delivery was made by the respondent to L N Poddar & Co., which acted as the appellant’s agent and paid the price for the total of one hundred sixty bales. In that transaction the respondent received Rs 3,840 from L N Poddar & Co., an amount said to be in excess of the actual price of the goods delivered.

Despite repeated demands, the respondent failed to deliver the balance of the goods contracted for, which the appellant characterized as a breach of contract. Consequently, the appellant claimed damages of Rs 9,800, representing the difference between the market rate on 31 March 1951 and the contract rate for the undelivered bales. In addition, the appellant claimed the sum of Rs 3,840 as an amount paid in excess of the value of the one hundred sixty bales delivered to L N Poddar & Co. The respondent opposed these claims on several grounds. Its principal contention was that, with respect to the contract in question, the appellant had acted merely as an agent for its disclosed principal, Messrs Khaitan and Sons Ltd., and therefore lacked standing to bring the suit. The respondent further alleged that Messrs Khaitan and Sons Ltd. had settled all of their rights and liabilities under the contract with their agent, rendering the present claim for damages untenable.

In the proceedings before the trial judge, the claim for damages was held to be untenable. Regarding the separate claim for a sum of Rs. 3,840, the respondent asserted that the appellant’s allegation was false. Although the respondent raised several additional pleas, the present appeal does not consider those. The trial was conducted by Mr. Justice Bose, who formulated twelve issues for determination. On the central point of dispute, the learned judge concluded that the appellant had entered into the contract with the respondent on its own behalf and not on behalf of the disclosed principal, as the respondent had alleged. The judge observed that the reference to Messrs. Khaitan and Sons Ltd. appearing in the bought‑and‑sold notes, which formed the basis of the respondent’s contentions, had been inserted by the brokers “by mistake or due to some misconception.” The trial judge also found that the respondent had breached the contract in the manner asserted by the appellant. However, the appellant’s claim that L. N. Poddar & Co. had made an excess payment of Rs. 3,840 was not proven. Consequently, the court entered a decree in favor of the appellant granting Rs. 79,800 together with interest as specified in the decree. The respondent appealed against that decree, primarily contesting the trial judge’s finding that the contract had been concluded by the appellant in its own capacity rather than on behalf of the disclosed principal. The appellant’s appeal relied, as did the trial court, on the bought‑and‑sold notes, arguing that those notes clearly demonstrated that the appellant had contracted on behalf of Messrs. Khaitan and Sons Ltd. Before the appellate court, the respondent maintained that the bought‑and‑sold notes alone defined the contractual terms and that no other evidence was relevant or admissible for determining those terms. Justice Das Gupta upheld this position, holding that the broker‑issued bought‑and‑sold notes constituted the exclusive source for the contract’s terms and that two letters dated 3 January and 15 January 1951 were inadmissible and irrelevant for interpreting those terms. Nonetheless, the judge also examined an alternative view that the letters might be considered in ascertaining the contract’s terms, and concluded that even when read together with the bought‑and‑sold notes, the letters led to the same result—that the appellant had entered into the contract on behalf of the disclosed principal. Justice Bachawat took a different view on the admissibility and relevance of the two letters. He held that the two bought‑and‑sold notes, together with the two letters, collectively constituted the terms of the contract.

The learned judge was inclined to hold that the letters could not be considered inadmissible or irrelevant. After reading the four documents together, the judge nevertheless agreed with the alternative conclusion recorded by Das Gupta, J., and found that all four documents supported the respondent’s claim that the appellant had entered into the contract on behalf of the disclosed principal. Both judges concurred that there was no evidence to sustain the appellant’s contention that the reference to the principal in the bought‑and‑sold notes resulted from any mistake. On the basis of these findings, the decree pronounced by the trial court was set aside and the appellant’s suit was ordered to be dismissed. Regarding costs, the appellate court took the view that the question raised before it about the effect of the bought‑and‑sold notes had not been specifically put to the trial court, and that several other pleas raised by the respondent had been found false by that court; consequently, the appropriate order on costs was that each party should bear its own costs throughout the proceedings. After that judgment was delivered, the appellant applied for and obtained a certificate from the High Court, and on the basis of that certificate the present appeal was brought before this Court. Counsel for the appellant vigorously argued that the appellate court erred in concluding that the contracts in dispute had been entered into by the appellant on behalf of the disclosed principal, Messrs Khaitan & Sons Ltd., Banaras. For the purpose of deciding this issue, the Court proposed to assume, in favour of the appellant, that the terms of the contract could be gathered from the two bought‑and‑sold notes relied upon by the respondent together with the two subsequent letters relied upon by the appellant. It was therefore convenient at this stage to set out those documents. The Court first referred to the brokers’ notes and the related confirmation slips. The brokers’ notes read as follows: “Hemp, Oil and Oil Seeds, Pollock House Brokers, (3rd Floor) 28‑A, Pollock Street. Any dispute in connection with this deal is subject to arbitration by the Bengal Chamber of Commerce. Calcutta, 18‑12‑1950. Radhakrishna Sivadutta Rai, A/C Khetan and Sons Ltd., Shewpur, Banaras. Dear Sirs, we confirm having purchased on your account and risk the noted goods from Messrs Tayeballi Dawoodbhai, 20, Zakaria Street, Calcutta. Commodity: 500 (five hundred) bales of Banaras No. 1 only with Agmark Jan/March ’51 at K. P. Docks @ Rs. 165 per bale of 400 lbs each on receipt of the goods. Yours faithfully, for T.N. Mehrotra and Company, S.D. T.N. Mehrotra. Sales Tax number should be furnished by the buyers otherwise to be charged.” The note continued: “Hemp, Oil and Oil Seeds, Pollock House Brokers (3rd Floor) Bank 4718 29‑A Pollock Street, Tel: B.K. 1914, Calcutta, 18‑12‑50. Any dispute in connection with this deal …”

In the documents presented, the parties agreed that any dispute arising from the transaction would be referred to arbitration by the Bengal Chamber of Commerce. The broker’s letter addressed to M/s Tayeballi Dawoodbhai, located at 20 Zakaria Street, Calcutta, confirmed that the broker had sold, on the buyer’s account and risk, five hundred bales of Banaras No 1 hemp marked with the Agricultural Grade (A.G.) mark to M/s Radhakrishna Shiv Dutt Rai of Khetan and Sons Ltd., Shewpur, Banaras. The letter specified that delivery was to occur in January or March 1951 at K.P. Dock, the price was set at Rs. 165 per bale of 400 pounds each, payment was to be made upon receipt of the goods, and a brokerage fee of 0‑8‑0 per bale was applicable; it also required the buyer to furnish a sales‑tax number or else the tax would be charged.

The broker further sent a correspondence to M/s T.N. Mehrotra & Co., Calcutta, acknowledging receipt of the purchase‑confirmation memorandum numbered 377 dated 18‑12‑1950, and the memorandum was signed by Gopal Lal Gupta on behalf of Radhakrishna Shiv Dutt Rai. A second acknowledgement was issued for purchase‑confirmation memorandum 378, also dated 18‑12‑1950, and likewise signed by Gopal Lal Gupta for the same firm, indicating that both confirmation slips bore the signature of Gopal Lal Gupta representing Radhakrishna Shiv Dutt Rai.

Subsequent to the broker’s dispatch of these notes, Gopal Lal Gupta, acting for the appellant, wrote a letter to the respondent on 3 January 1951, and the respondent replied on 15 January 1951. In the appellant’s letter, addressed to Messrs Tayeballi Dawoodbhai, the writer stated that the appellant had purchased from the respondent one thousand bales of Banaras hemp through Messrs T.N. Mehrotra & Co., located at 28‑A Pollock Street, Calcutta, on the following terms: five hundred bales of Banaras No 1 with A.G. mark at Rs. 166 per bale of approximately 400 pounds for delivery at K.P. Docks in January/March 1951, and five hundred bales of Banaras No 2 with A.G. mark at Rs. 145 per bale of approximately 400 pounds for delivery at E.P. Docks in the same period, requesting confirmation of these terms.

The respondent’s reply, addressed to Messrs Radhakrishna Shiv Dutt Rai of Banaras, confirmed that through Messrs T.N. Mehrotra & Co., the respondent had sold one thousand bales of Banaras hemp as follows: five hundred bales of Banaras No 1 with A.G. mark at Rs. 165 per bale of about 400 pounds for delivery at K.P. Docks in January/March 1951, and five hundred bales of Banaras No 2 with A.G. mark at Rs. 145 per bale of about 400 pounds for delivery at K.P. Docks in the same period, thereby acknowledging the appellant’s earlier letter; the reply was signed by a partner of the respondent and copies were sent to Messrs T.N. Mehrotra & Co., Calcutta, and to Gopinath Mehrotra, Banaras.

Mr Pathak, appearing for one of the parties, argued that when interpreting the effect of these documents the reference to Khaitan & Sons should be disregarded, contending that the reference arose from a mistake or misconception on the part of the brokers and that the trial court’s finding of mistake should be upheld rather than the appellate court’s contrary conclusion.

In this matter, the party alleged that the reference to Khaitan & Sons in the bought‑and‑sold notes arose solely from a mistake or misconception on the part of the brokers. He further argued that the finding recorded by the trial court on the issue of mistake should be upheld, rather than the finding made by the appellate court. The Court found this argument unconvincing. Regarding the notes, the evidence of two brokers, Trilokinath and Gopinath, was examined, and their testimonies directly refuted the theory of any mistake or misconception. Trilokinath testified under oath that, after receiving the offer from the respondent, he telephoned his brother Gopinath, who acted as a hemp broker for the firm of Sewnath Gopinath, and communicated the offer to him. Gopinath replied that the offer had been closed either on the sixteenth day of the month or on the morning of the seventeenth, and he conveyed this information to Trilokinath over the telephone. When asked to recount the content of his brother’s communication, Trilokinath stated that Gopinath informed him that the offer, involving one thousand bales at rupees 165 and rupees 145 respectively, had already been sold to Khaitan Sons & Co., Fibre Ltd. He further added that he received another message from his brother on either the eighteenth or the night of the seventeenth, instructing him to prepare a contract so that the transaction would appear to be through Khaitan & Sons via the appellant. Consequently, if Trilokinath’s testimony is accepted, it demonstrates that the brokers could not have been mistaken or misapprehended when they referred to Khaitan & Sons as the principal in the transaction. Gopinath’s testimony substantially corroborated Trilokinath’s statements. He explained that, upon receiving the offer from his brother, he approached Deokinandan, an employee of Khaitan & Sons, and after discussions with Deokinandan the sale was concluded on behalf of Khaitan & Sons. Having finalized this contract with Deokinandan, who represented the principal, Gopinath instructed Trilokinath to close the offer and to draft a note indicating that the appellant was acting as agent for the disclosed principal, Khaitan & Sons. The combined evidence of the two brothers, who functioned as brokers for the suit transaction, thereby excluded any possibility of mistake or misapprehension. On the appellant’s side, Gopal Lal Gupta gave evidence attempting to explain why he had not objected to the inclusion of the name Khaitan & Sons in the notes. He suggested that when he signed the confirmation slips after receiving the notes, he had not noticed the reference to Khaitan & Sons, and that the purchase had been made by the appellant for its own account, not for any other firm.

In the trial, Gopal Lal Gupta testified that the purchase had been made by the appellant for its own account and not for any other firm. He further suggested that, had he noticed the notes referring to Khaitan & Sons, he would either have demanded the name be deleted or would not have concluded the contract. However, during cross‑examination, Gopal Lal became unsettled and admitted that, although he might have seen the reference to Khaitan & Sons when signing the confirmation slip, he had not read the document carefully. He was nevertheless forced to concede that he had examined the note before affixing his signature to the confirmation slip. Under the pressure of cross‑examination, Gopal Lal incidentally remarked that the reference to Khaitan & Sons might have been a mistake. The Court found that Gopal Lal’s evidence was riddled with contradictions and that his explanation for signing the confirmation slips was wholly unsatisfactory. Consequently, the Court held that his testimony could not support a claim of mistake regarding the inclusion of Khaitan & Sons in the notes. In this view, the appellate court was properly justified in overturning the trial court’s finding and concluding that the reference to Khaitan & Sons was neither a mistake nor a misconception. The Court also noted the appellant’s conduct when the same dispute was presented before the Bengal Chamber of Commerce for arbitration. In those arbitration proceedings, the respondent raised the identical plea that the appellant could not claim the contract because it had acted on behalf of a disclosed principal and for its own account. That plea appears to have been accepted, leading the arbitration to be declared outside the Chamber’s jurisdiction. In response to the respondent’s allegation that the appellant was an agent of “Khaitan & Co.”, the appellant argued that no firm named Khaitan & Co., Khaitan & Sons Ltd., or Khaitan & Sons existed in Shewpur, Banaras. The appellant therefore maintained that the Chamber’s jurisdiction could not be challenged on the ground of the alleged agency relationship. He also contended that the reference to Khaitan & Sons was merely superfluous and should not be given any importance. While the suit contains a faint attempt to question the identity of the firm Khaitan & Sons, Mr Pathak has chosen not to raise that issue before this Court. Thus, the primary argument presented by the appellant in the arbitration concerning the reference to Khaitan & Sons was essentially frivolous, and no credible case of mistake was established.

The Chamber’s reliance on the reference to Khaitan & Sons appearing in the notes was deemed entirely without merit. No allegation of mistake had been articulated at any stage, and the Court had already observed that there was no evidentiary basis upon which a finding of mistake could be reasonably drawn in the appellant’s favour. Consequently, the Court proceeded to examine the construction of the relevant documents on the premise that the mention of Khaitan & Sons in the notes was not the product of any error but was instead made in the ordinary course of business by the brokers. The next step was to determine the effect of the bought and sold notes according to the established customs of mercantile transactions. Counsel for the respondent, identified as Mr Viswanatha Sastri, argued that under recognized commercial usage, when the bought and sold notes display no variation or disparity, the notes issued by the brokers together constitute the terms of the contract between the parties for whom the brokers are acting. The Court expressed an inclination to accept this submission. It noted that the legal effect of broker‑issued notes has been the subject of frequent judicial consideration, and it turned to an early authority dating back to 1846, namely the Privy Council decision in Cowie v. Remfry (1). This precedent would illuminate the principles applicable to the present dispute.

In Cowie v. Remfry, the parties were the merchants A C & Co. and H & Co., both engaged in trade at Calcutta. H & Co. sold a substantial quantity of indigo to A C & Co. through a broker who prepared a sold note addressed to H & Co. and presented it to H & Co. for approval. H & Co. objected to a particular word in the note; the broker then conveyed the note to A C & Co. together with notice of H & Co.’s objection. A C & Co. responded by crossing out the disputed word, initialing the alteration, and returning the note to the broker, who subsequently delivered the amended note to H & Co. The following day the broker supplied A C & Co. with a bought note that differed in certain material terms from the sold note. H & Co. instituted suit against A C & Co. for breach of the contract as embodied in the sold note. The Supreme Court at Calcutta held that the sold note alone constituted the contract and ruled in favour of the plaintiff. On appeal, however, the Privy Council reversed that decision, holding that the transaction involved both a bought and a sold note and that the alterations made by A C & Co., including the crossing out of a word and the addition of initials, were insufficient to render the sold note alone a binding contract. The Privy Council emphasized that because there was a material variation between the terms of the bought note and those of the sold note, the two notes together did not give rise to a binding contract. This analysis demonstrated that, where a material discrepancy exists between bought and sold notes, the contract cannot be said to be embodied in a single note, and the parties must be regarded as having no enforceable agreement under such circumstances.

In that earlier case the court observed that the bought and sold notes prepared by the broker did not correspond with each other, and consequently it held that when the two notes failed to tally, the sold note by itself could not be regarded as containing the terms of the contract. While addressing this point, the Privy Council’s Lords referred to the commercial custom that governed the preparation of bought and sold notes. They remarked that the long‑standing usage in the mercantile world deserved a high degree of respect, because its very existence demonstrated that traders had found it useful and advantageous; the presumption therefore lay in favour of that usage, and no inference of deviation could be drawn from doubtful circumstances. On that basis the Council concluded that the transaction must be understood as one contemplated by both the bought note and the sold note, and that the contract was embodied in the two documents together rather than in either one alone. Since a material variation existed between the two notes, the Council applied the general principles of law to determine that no binding contract had been created. This judgment therefore showed that the mercantile practice of forming contracts through paired bought and sold notes issued by brokers was treated by the Privy Council as a well‑recognised commercial convention.

The next authority that may be cited with advantage is the decision in Sievewright v. Archibald. In that case, as in the earlier one, there was a material discrepancy between the bought and sold notes, and the court held that the variation was sufficient to prevent the documents from constituting a memorandum that would satisfy the requirements of the Statute of Frauds. While considering the issue, Lord Campbell, C. J., made several general observations that illuminate the origin of the bought and sold notes and the effect usually ascribed to them by commercial usage. He explained that if the bought note is treated as a memorandum of an oral agreement, the sold note may be viewed in the same way, and questioned which of the two should prevail. He observed that the matter returned to the original point of contention—the variance between the notes—over which the parties had earlier disputed. He stressed that the presence of bought and sold notes does not necessarily mean that they are the sole evidence of the contract; other circumstances might justify treating them merely as memoranda of an oral agreement. Moreover, he held that where the broker had entered the contract in his own book and signed that entry, that entry alone represented the binding contract between the parties, irrespective of any dicta or a purported ruling of Lord Tenterden in Thornton v. Meux. A mistake by the broker in transmitting a copy of that entry in the form of a bought or sold note would not affect the validity of the contract, because the broker’s signed book entry, not the notes, was the operative instrument.

In the case, the Court explained that when a broker received authority from one party to sell and from another party to buy, the broker’s written reduction of the agreement, signed in the capacity of a common agent, bound both parties as if each had personally signed the document, in accordance with the Statute of Frauds; this was the broker’s duty and, until recent times, every broker performed this duty with scrupulous care. The broker, however, used to dispatch the so‑called bought and sold notes to his principals merely to inform them that he had acted upon their instructions, not to present those notes as the actual contract that would be enforceable between them. The prevailing practice illustrated this distinction: the bought note was routinely sent to the buyer and the sold note to the seller; if those notes were intended to constitute the contract, the opposite exchange would have been required, so that each party would hold the other party’s engagement rather than its own. The Court noted that the broker, seeking to avoid inconvenience, now omitted any entry and signature in his own book while continuing to send the bought and sold notes in the same manner as before. According to established jurisprudence, the Court held that when the two notes are identical they are regarded as creating a binding contract, but if there exists any material variation between them, both notes become nullities and no enforceable contract exists. Although plaintiff’s counsel challenged this principle, the Court observed that it had been applied consistently in a long series of cases and could not be overturned without compelling reason. The Court further reasoned that, in the absence of any other evidence of the agreement, a binding contract could arise only if the two notes substantially agreed, because contracting parties must consent to the same terms; where the terms differ, there is no justification for giving preference to one note over the other. These observations established two propositions: first, that a material discrepancy between the bought and sold notes prevents either note, whether taken singly or together, from being relied upon to prove the contract’s terms; second, that when the notes correspond, they are deemed to constitute a binding contract. The Court cited the Privy Council’s decision in Ah Shain Shoke v Moothia Chetty, where Sir Richard Couch recorded that a respondent insisted the contract was not concluded until both bought and sold notes were signed, and that those notes were the sole evidence of the agreement. In light of this legal position, the Court indicated that the effect of the bought and sold notes in the present matter must be examined accordingly.

In the present case there were thirty notes. Each note referred to the appellant and added the words “A/c Khaitan & Sons Ltd.” No inconsistency existed among the notes; therefore both notes could be relied upon to prove the terms of the contract. Because the notes bear the appellant’s name together with the specific reference to “Khaitan & Sons Ltd.” preceded by “A/c”, it is clear that the appellant was acting on behalf of the disclosed principal. The appellant understood that the reference to Khaitan & Sons would inevitably bolster the respondent’s claim that the respondent was not entitled to maintain the present suit; consequently the appellant argued that the reference was a mistake. Accordingly, if the material issue were examined solely on the basis of the bought and sold notes, the appellant was acting as an agent of the disclosed principal and therefore had no right to sue or to assert any cause of action of its own.

The Court cited the decision in Gadd v. Houghton, where James, L.J. observed that when a person states that he is making a contract “on account of” another, he is using the strongest language to show that he does not bind himself but binds his principal. In that case fruit brokers in Liverpool issued a sold note that read: “We have this day sold to you on account of James Morand & Co., Valentia, 2000 cases Valentia, oranges, of the brand James Morand & Co., at 12s. 9d. per case free on board,” and the brokers signed the note without any further qualification. The purchaser sued the broker for non‑delivery of the oranges. The Court held that the words “on account of James Morand & Co.” indicated the intention that the foreign principal, not the brokers, should be liable, and therefore the brokers were not liable under the contract.

The Court noted that in deciding the brokers’ liability two points were considered. The first point favored imposing liability on the brokers because they had signed the note without expressly stating they were acting for the disclosed principals; the principle is that a person who signs a contract in his own name is prima facie a contracting party and therefore liable, unless the instrument contains a very strong indication to the contrary. The learned judge accepted this principle, but also observed another fact that had overriding effect: the note demonstrated that the brokers were acting for the disclosed principal, and that fact clearly repelled the brokers’ liability with respect to the contract (1) (1876) 1 Ex. 357.

The Court observed that the contract expressly identified a disclosed principal, and that identification removed any liability from the brokers with respect to the agreement. In considering the effect of the signature, the Court quoted the view of Mellish, L.J., who stated that when a signature appears at the end of a document it applies to the entire content of the contract. He further explained that if the document shows that an agent is acting on behalf of another person, the logical consequence is that the other person, not the agent, bears the liability. He described the situation as one of the simplest possible cases and asked how the words “on account of Morand & Co.” could be interpreted merely as a description. According to him, those words indicate that Morand & Co. were the sellers, and consequently the individuals who signed the document were simply brokers and were not liable. The Court referred to Mellish, L.J.’s observations because they would be materially helpful in addressing the point raised by counsel for the appellant, who relied on two subsequent letters.

The Court noted that the purchase‑and‑sale notes in this matter clearly show that the appellant acted for a disclosed principal and that the disclosed principal, and no one else, was the contracting party. Nevertheless, counsel for the appellant argued that the contract’s terms and the identity of the parties could not be determined without reading the notes together with the two letters that were later exchanged. The Court recounted the sequence of the documents: first the brokers delivered the notes to both the appellant and the respondent; next each party filed confirmation slips; thereafter the two letters were exchanged. In the appellant’s letter to the respondent, counsel highlighted that the appellant wrote that “they” had bought the 1,000 bales in question. Counsel emphasized the use of the word “we” in that letter, noting that the letter was signed by the appellant without indicating that it was acting on behalf of the disclosed principal. Similarly, the respondent’s letter to the appellant stated that the respondent had sold the bales “to you.” Counsel argued that these correspondences should not be down‑played in determining the parties to the contract. The Court agreed that the letters do not contain all the contractual terms, but they must be read alongside the notes. The notes themselves refer to an arbitration clause providing that any dispute would be referred to the Bengal Chamber of Commerce, and they also stipulate that the buyer must furnish a sales‑tax number or else be charged. These provisions are unquestionably part of the contract, although the dispute concerns how they interact with the letters.

In this matter, the court observed that the correspondence exchanged between the parties contained no reference to a principal and proceeded on the assumption that the appellant was acting on its own behalf, not on behalf of any disclosed principal. The court held that this circumstance should be taken into account when determining whether the appellant was acting for a disclosed principal. Counsel for the appellant argued that the appellant’s signature on its letter dated 3 January 1951 and the use of the word “we” in the first paragraph of that letter demonstrated that the appellant was acting for itself. Counsel further relied on a decision of the King’s Bench Division in H. O. Brandt & Co. v. H. N. Morris & Ltd. (1). In that case, the plaintiffs, who conducted business in Manchester, gave the defendants a bill of exchange dated 3 September 1914. The bill was addressed to the defendants and headed “From Messrs. H. O. Brandt & Co., 63 Granby Row, Manchester, For and on behalf of Messrs. Sayles Bleacheries, Salesville, Rhode Island, U. S. A.” The note contained the statement “we have this day bought from you 60 tonne pure aniline oil” and was signed “H. O. Brandt & Co.” The plaintiffs sued for non‑delivery of the oil, and the defendants resisted on the ground that the plaintiffs had contracted on behalf of a disclosed principal and therefore could not be sued. Viscount Reading, C. J., and Scranton, L. J., with Neville, J. dissenting, held that the plaintiffs were the contracting parties and were entitled to sue on the contract. The majority decision was based on three grounds. First, the plaintiffs had signed the note without describing themselves as acting for the principal; consequently, following the language of Mellish, L. J., in Gadd (2), it was held that prima facie a person who signs a document in his own name and states “I have this day bought from you” is personally liable on the contract. Second, the reference to the foreign principal in the note was made merely to disclose the destination of the goods, a requirement during wartime to indicate where exported goods were to be sent; thus the reference served a regulatory purpose rather than evidencing agency. Third, the statement at the head of the note that the plaintiffs were acting for and on behalf of a foreign principal could not overcome the prima facie presumption that a person signing a contract in his own name is personally bound. Accordingly, the court affirmed the rule of construction that a person who signs a contract in his own name is, unless the document explicitly indicates otherwise, the contracting party and personally liable.

In this case the Court observed that the individual who signed the document was treated as the contracting party because the reference to the disclosed principal was explained as serving a purpose other than establishing agency. The same rule of construction was also applied because the plaintiffs were acting on behalf of a foreign principal. The Court then recalled Section 230 of the Indian Contract Act, which provides that, absent a specific agreement to the contrary, an agent cannot enforce a contract that he has entered into for his principal, nor is he personally bound by that contract. The statute, however, lists three situations in which a contract is presumed to exist despite the general rule. One of those situations is where an agent contracts for the sale or purchase of goods on behalf of a merchant who resides abroad. Accordingly, when an agent signs a contract for a disclosed foreign principal, the ordinary provision of Section 230 does not apply, because the law presumes the existence of a separate agreement that makes the agent personally liable even though he acted for a foreign principal. On that basis the Court declined to hold that the decision in H. C. Brandt & Co. establishes an absolute rule of construction that the appellant could rely upon.

The Court noted that Justice Neville, who dissented from the majority, had observed that he would not have been isolated on the point if it were not for the wartime requirement to disclose the destination of the goods, quoting: “I rather gaudier that I should not have found myself in isolation on this point were it not for the fact that during the war there is an obligation to disclose the destination of the goods.” That observation indicated that the reference to the disclosed principal had not been given its full effect when the question of the agent’s liability was considered, because the majority held that the reference was made principally, if not exclusively, to disclose the destination of the goods. In support of the argument that the recitals in the two letters showed that the contract had been entered into by the appellant on his own behalf, counsel referred to the authority of Bowright on agency. Bowright’s statement was quoted at length: “The question whether the agent is to be deemed to have contracted personally, in the ease of contract in writing other than a bill of exchange, promissory note, or cheque, depends upon the intention of the parties, as appearing from the terms of the written agreement as a whole, the construction whereof is a matter of law for the Court – (a) if the contract be signed by the agent in his own name without qualification, he is deemed to have contracted personally, unless a contrary intention plainly appears from other portions of the document; (b) if the agent add words to his signature, indicating that he signs as …” The passage underscored that the manner of signing must be read together with the other statements in the relevant documents to determine whether the agent acted personally or on behalf of a principal.

The Court cited the authority of Bowstead on agency, which explains that when an agent signs a document in his own name without any qualification, he is deemed to have contracted personally unless the document contains other clear indications to the contrary. Conversely, if the agent adds words to his signature such as “as an agent” or “for or on behalf of a principal,” he is presumed not to have contracted personally, unless other parts of the document unmistakably show that he intended to bind himself despite the qualified signature. The authority further advises that every word used in a contract must be given effect and none should be disregarded unless it is evident that the word was introduced inadvertently.

Applying these principles, the Court observed that the appellant’s case could not rely solely on the manner of his signature or the use of the pronouns “we” and “you” in the letters. The letters in question were examined together with the bought‑and‑sold notes, which unequivocally indicated that the appellant was acting on behalf of the disclosed principal, Khaitan & Sons. When the letters are read in the context of those notes, the appellant’s signature and the wording of the letters do not alter the clear indication that the principal was the party to the contract. The Court noted that it is unnecessary for an agent to repeatedly state that he is acting for a disclosed principal; the parties were already aware of this relationship. Consequently, the letters and the confirmation slips must be presumed to be consistent with the bought‑and‑sold notes, and undue importance should not be attached to the signature or the pronouns used. In the Court’s view, the appellate court correctly concluded that, even when read alongside the confirmation slips and the two letters dated 3 January 1961 and 15 January 1951, the evidence inevitably shows that the appellant entered into the contract on behalf of Khaitan & Sons Ltd. Therefore, as a matter of law, the appellant could not maintain the present suit. The Court also noted that the counsel for the appellant attempted, in the alternative, to argue that subsequent conduct created a contrary contract, but this argument was not permitted to be advanced. Consequently, the appeal was dismissed and each party was ordered to bear its own costs.

Even assuming that the appellant acted on behalf of the disclosed principal, it could still sue because the parties’ later conduct suggested a contract to the contrary could be reasonably inferred. However, the Court did not permit counsel for the appellant, Mr. Pathak, to pursue that argument during the hearing. The appellant had earlier conceded before the Appellate Court that if the plaintiff firm were deemed an agent of Khaitan & Sons Ltd., the suit could not be maintained. That concession was based on the provisions of section 236 of the Contract Act, which governs agency relationships and liability. Moreover, the alternative plea that Mr. Pathak sought to raise was not specifically pleaded or examined by the trial court. Consequently, the appellate Court concluded that the appeal failed on its merits and therefore ordered that it be dismissed. The Court reasoned that the appellant’s earlier acknowledgment of the agency relationship removed any basis for asserting a separate contractual right. Since the agency relationship, if established, would bar the appellant from instituting a suit, the alternative inference from later conduct could not be entertained. The trial court record showed no explicit inclusion of the alternative claim, and therefore the appellate review could not resurrect a matter that had not been properly raised. Accordingly, the appellate judgment affirmed the trial court’s determination that the suit was untenable under the applicable legal principles. The order that each side bear its own costs reflects the principle that parties responsible for their own positions should not be penalised further. Thus, the appeal was ultimately dismissed, bringing the proceedings to a final close and leaving the parties to bear their own costs.