Moot Court Competition Memorial
A well researched moot memorial on a Law of Contracts problem....
YEAR INTRA MOOT COURT COMPETITION
BEFORE THE HONOURABLE HIGH COURT OF ALLAHABAD
APPELLATE JURISDICTION OF THE HIGH COURT OF ALLAHABAD
APPEAL Lalooji & Sons.......................................... Sons................................................................ ............................................ ...........................Appellant .....Appellant v State of Uttar Pradesh...................................... Pradesh......................................…………………………Respondents …………………………Respondents Ravi Pandey( Roll no.- 95) Ravi Gangal (Roll no.- 96) Ravi Sourav ( Roll no.- 97)
TABLE OF CONTENTS INDEX OF AUTHORITY ...................................................................................................................... 3 STATEMENT OF JURISDICTION ....................................................................................................... 4 STATEMENT OF FACTS ..................................................................................................................... 5 SUMMARY OF ARGUMENTS ............................................................................................................6 ARGUMENTS ADVANCED ................................................................................................................ 6 PRAYER . .............................................................................................................................................. 13
INDEX OF AUTHORITY Cases Referred
British Movietonews Ltd. v. London and District Cinemas Ltd. British Movietonews Ltd. v. London and District Cinemas Ltd. Brogden v. Metropolitan Railway Co.
L.R.  A.C. 166
Williams v. Roffey Bros & Nicholls (Contractors) Ltd. Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc.
 1 All ER 512
Rajanna v Union of India Yagar Muang v. State of Arunachal Pradesh
AIR  SC 1966
 1 K.B. 190  2 App Cas 666, HL.
252 F.3d 218. (2d Cir. 2001)
Sarah Howard Jenkins, “Corbin on Contracts”, Vol. XIII, (ed Joseph M. Perillo), LexisNexis Mathew Bender, San Francisco, 2003 Pollock & Mulla, “Indian Contract & Specific Relief Acts”, Thirteenth Edition, Vol. I, (ed R. G. Padia), LexisNexis Butterworths, New Delhi Black's Law Dictionary, Sixth Edition
Indian Contract Act, 1872
Indian Evidence Act, 1872
STATEMENT OF JURISDICTION The Court may exercise its appellate jurisdiction under Section 96 of the Civil Procedure Code, 1908 wherein it is clearly stated that except when otherwise expressly provided in the body of the Code or by any other law for the time being in force, an appeal shall lie from every decree passed by any Court exercising original jurisdiction the Court authorized to hear appeals from the decisions of such Court.
STATEMENT OF FACTS
1) Lalloji and Sons is one of the most prestigious firms dealing in logistics in India, on May 3 2002 the firm came into an agreement with D.M. Allahabad that from December 1 2002 they would provide logistic support to Kumbh Mela, the contract will last for an year, State of U.P. by cl. 12 of the agreement agreed to pay to the firm the actual expenses incurred for providing the logistics report to the firm. 2) December 2002 communal riots broke out in Meerut and the warehouses were burnt by communal mobs, this resulted in enormous increase in the demand by the government of logistic support. On June 20, 2003 the original agreement was by mutual consent revised and the uniform rate of 10 per square per feet for tenements was substituted by a graded scale. By their communication dated July 6, 2003 the firm demanded that the remuneration should be enhanced, they proposed a various increments under different heads, this revision of the rates was claimed on the plea that the existing rates were fixed in normal times and today's conditions are totally altered because of the communal rights. To this letter no immediate reply was given by the State of U.P. and the firm continued to supply logistics till September 2003. 3) On October 17, 2003 the state of U.P. exercising their option under cl. 9 of the agreement served the firm with a notice of the termination of the agreement. On November 1, 2003 the firm submitted their claim contending that the supplementary agreement dated June 20, 2003 was void and not binding upon them, and that , in any event, and from time to time they were assured by the chief minister that their claim would be favourably considered by the state of U.P. and relying on these assurances they continued to supply the logistics support in quantities demanded by the government after incurring "heavy extra expenditure". The Principle Secretary if U.P. Government who was duly authorised by the government gave repeated verbal assurances that their demands would be satisfied and requested them to continue supplies for the successful conduct of Kumbh Mela. Later it was denied by the government that any assurance was given from their side and the firm continued to supply logistic support relying upon such alleged assurances. 4) The firm contended that the terms of the contract were "entirely displaced" by reason of the commencement of hostilities and the terms of the contract agreed on December 2002
could not be taken into view because of the turn of events which were never contemplated by the parties. The state of U.P. contended that the performance of the contract has not become impossible or unlawful, the contract was in fact performed by the firm, therefore there could not have been a claim for the breach of the contract since it and already been performed. 5) The case is scheduled for hearing in Allahabad High Court in appellate jurisdiction where the District Court has held the firm liable for the breach of Contract.
SUMMARY OF ARGUMENTS
1) The contract dated 20 June 2003 is void by the virtue of its frustration due to unprecedented events. 2) The contract dated 20 June 2003 is void and the communication of July 6, 2003 and the further acceptance of the logistics by the respondents can be construed to have created a contract by variation thus making the respondents liable.
ARGUMENTS ADVANCED st
I Issue:Frustration of contract dated 20 June 2003
The counsel on behalf of the appellants contends that the contract dated 20 June 2013 stands frustrated by virtue of the unprecedented events which post the commencement of the contract. The counsel further submits that even if the contract was entered into post commencement of the riots, the ramifications of something as volatile as a riot, its further outcome and consequences, could not have been possibly contemplated by a reasonable man. Keeping this in mind the counsel submits before the court an excerpt from the case of Lord Simon in British Movietonews Ltd. v. London and District Cinemas Ltd 1. which is as follows:-
L.R.  A.C. 166
"The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate - a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point - not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true construction it does not apply in that situation. When it is said that in such circumstances the court reaches a conclusion which is 'just and reasonable' (Lord Wright in Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd., 1942 AC 154 at p. 186) or one 'which justice demands' (Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. Ltd. (1926) AC 497 (510), this result is arrived at by putting a just construction upon the contract in accordance with an 'implication ............. from the presumed common intention of the parties'' Thus it can simply be attributed from the above cited authority that if the conditions post commencement of the contract are fundamentally and so extraneously different from the condition which preceded the commencement of the contract, the contract shall cease to exist. Further reliance can be laid on the judgement in the case of British Movietonews Ltd. v. London and District Cinemas Ltd. 2 which is as follows:"............. no matter that a contract is framed in words which taken literally or absolutely, cover what has happened, nevertheless, if the ensuing turn of events was so completely outside the contemplation of the parties that the court is satisfied that the parties, as reasonable people, cannot have intended that the contract should apply to the new situation, then the court will read the words of the contract in a qualified sense; it will restrict them to the circumstances contemplated by the parties; it will not apply them to the uncontemplated turn of events, but will do therein what is just and reasonable." Thus if it can safely be proved that the ensuing turn of events as in the case at hand where the ramifications of a riot could not have been conceived by a reasonable due to its volatile
 1 K.B. 190
nature, then it is for the court to "read the words of the contract in a qualified sense" and to restrict them to the circumstances contemplated by the parties. Further the counsel would like to most humbly submit before this court a excerpt from Corbin on Contracts 3 which is as follows:"An Official comment to the Uniform Commercial Code states that increased cost alone will not excuse performance but an increase that " alters the essential nature of the performance" may justify a discharge under the impracticability rule of UCC 2-615. Uniform Commercial Code 2-615 sets forth a rule for excusing non- performance in contracts for the sale of goods, in this commercial context the UCC rejects the stringency of the traditional common law " impossibility" doctrine and adopts the more lenient impossibility approach that had emerged in some court cases earlier in the twentieth century. Rather than excusing a seller from its duty of performance only if it is physically or objectively impossible, UCC 2-615 justifies a seller's non- performance if it is "commercially impracticable"" Throwing some light on the issue at hand from the abovementioned authority and using it in the present context it can be considered that the appellant in the present case can be exempted from the performance of the contract because of the commercial impracticability which can be considered to be a valid ground for the frustration of a contract.
II Issue: The supplementary agreement dated June 20, 2003 is void. A. The communication of the firm dated July 6, 2003 led to the implied form of variation in the terms of the earlier contract.
Parties to an agreement may vary some of its terms by a subsequent agreement. The Indian Evidence Act 1872 forbids the admission of oral evidence to contradict or vary written agreements,4 but this does not bar oral evidence to prove a subsequent variation or
Sarah Howard Jenkins, “Corbin on Contracts”, Vol. XIII, (ed Joseph M. Perillo), LexisNexis Mathew Bender, San Francisco, 2003, p.51 4 The Indian Evidence Act 1872, S. 92; The Specific Relief act 1963, S. 18(c), as to the effect of subsequent variation on the right to seek specific performance.
modification, unless such variation is required by law to be in writing or seeks to vary an instrument which has been registered.5 It is humbly submitted that by their communication dated July 6, 2003, the firm had demanded that the remuneration, establishment & contingencies, and mandi & financing charges be enhanced. In respect of the buying remuneration, a 25% increase was proposed; and in respect of mandi & financing charges, an increase of 112%. This revision of rates was totally justified considering the fact that the existing rates, fixed in normal time, were “entirely superseded by totally altered conditions obtaining in communal riot”. To this letter, no immediate reply was given b y State of U.P., but still the firm continued to supply the logistic till September 2003 which was duly received by the State of U.P. Besides this, since July 6, 2003 the appellants were being continually assured by the Chief Minister that the claim made by them would be favourably considered. It is only because of relying on this assurance that the appellants had continued the supply inspite of the fact that they were incurring “heavy extra expenditure” for the same. Also, the Principal Secretary of U.P. G overnment, who had been duly authorized in that behalf, had given repeated verbal assurances to the firm that their demands would be satisfied and had requeste d them to continue supplies for the sake of successfully conducting Kumbh Mela. Thus, by their conduct, the respondent had impliedly accepted to bring about a variation in the terms of the agreement dated June 20, 2003. In the case of Brogden v. Metropolitan Railway Co.6 : B had been supplying coal to a railway company without any formal agreement. B suggested that a formal agreement should be drawn up. The agents of both the parties met and drew up a draft agreement. It had some blanks when it was sent to B for his approval. He filled up the blanks including the name of an arbitrator and then returned it to the company. The agent of the company put the draft in his drawer and it remained there without final approval having been signified. B kept up his supply of coals but on the new terms. A dispute having arisen B refused to be bound by the agreement. The final acceptance “was clearly given”, said Lord Cairns LC “when the company commenced a course of dealing which is referable only to the contract and when that 5 6
The Indian Evidence Act1882, s. 92, proviso 4. (1877) 2 App Cas 666, HL.
course of dealing was accepted and acted upon by B in the supply of coals.” This is a classic example of acceptance by conduct. In the present case, the assurances given to the appellants from time to time and no refusal of the demands made by them clearly led to implied form of alteration in the terms of the earlier agreement. This led the appellants into believing that their claim has been accepted by the respondents which will be duly honoured. The performance of the contract based on the terms of the agreement dated June 20, 2003 had become impossible due to the drastic prise rise in the turn of the events which were never in the contemplation of the parties. Hence, it is submitted that a contract by implied form of variation had come into existence based on the representations made by the appellants on July 6, 2003 and the conduct of both the parties thereafter. B. With the coming into force of the new agreement on the representations made on July 6, 2003, the agreement dated June 20, 2003 was dischrged.
As per Section 62 of the Indian Contract Act, 1872: 62. Ef fect of novation , recissi on and alterati on of contr act: If the parties to a
contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” Thus, in respect of the alteration made impliedly based on the representations made by the appellants via letter dated July 6, 2003, the agreement entered into on June 20, 2003 is no more binding on the appellants. The consideration for the variation if i t has to be found lies in the mutual abandonment of existing rights or conferring new benefits by each part y on the other; or in the assumption of additional obligations or incurring additional liabilities or increased detriment.7 The courts have also recognised a „practical benefit‟ arising to a party undertaking an additional detriment, as sufficie nt consideration.8 It is humbly submitted before the Court that in the present set of facts and circumstances, it can be seen that earlier the appellants had been undertaking „additional detriment‟ due to the unexpected drastic price rise because of the communal riots, and this was changed when a „practical benefit‟ arose to them by implied acceptance, made to them by the State
Pollock & Mulla, “Indian Contract & Specific Relief Acts”, Thirteenth Edition, Vol. I, (ed R. G. Padia), LexisNexis Butterworths, New Delhi, p. 1242. 8 Williams v. Roffey Bros & Nicholls (Contractors) Ltd.  1 All ER 512.
of U.P., of the representations made by the appellants on July 6, 2003. Thus, there was sufficient consideration for the variation to occur. This alteration, thus led to the changing in the terms of the earlier contract dated June 20, 2003, because of which it was discharged as soon as the new agreement came into existence and hence, the earlier agreement is not binding on the appellants. Both, the question of the extent to which a substituted contract operates as a discharge of a prior claim and the number of antecedent claims within the scope of the substituted contract, are questions of construction and interpretation of the agreement. 9 The two contracts must be construed together. Insofar as they are consistent, the later one prevails.10 Thus, it is humbly submitted before the Court that the agreement dated June 20, 2013 is not enforceable as far as the prices are concerned, which have been altered by the new agreement. rd
III Issue: Ex- gratia compensation to be awarded to the appellants
The counsel, representing the appellant, pleads before the Hon'ble court to consider the claim for damages made by firm to be analogized with the claims made by a single personal entity. Henceforth the counsel requests the court to apart from other damages claimed by the appellant the court must contemplate grating Ex gratia compensation to them. Ex gratia payment can be defined as "Out of grace; as a matter of grace, fa vor, or indulgence; gratuitous. A term applied to anything accorded as a favor; as distinguished from that which may he demanded ex debito, as a matter of right" 11. Basically Ex gratia is a Latin for "by favour", it is a payment made voluntarily, out of kindness of law. The person or authority making a payment Ex gratia is not legally at fault but by the virtue of moral defect in its conduct can be made liable for the above mentioned payment. Hon'ble Supreme Court of India in Rajanna v Union of India 12 , - appellant claimed ex-gratia payment due to suffering of permanent partial disablement of injuries received while performing duty - Apex Court found that appellant sustained injuries on VIP security duty -
Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc. 252 F.3d 218. (2d Cir. 2001). Sarah Howard Jenkins, “Corbin on Contracts”, Vol. XIII, (ed Joseph M. Perillo), LexisNexis Mathew Bender, San Francisco, 2003, p.413. 11 According to Black's Law Dictionary, Sixth Edition. 12 AIR  SC 1966 10
employment in workmen's Compensation Act is for liability to pay 1000, employee was held to be entitled for amount . Similarly in Yagar Muang v. State of Arunachal Pradesh 13, in which petitioner's husband was serving as Assistant Engineer and he was killed by the terrorists/extremists NSCN while he was on official duty, and Commissioner accorded sanction of a meagre amount not exceeding Rs. 3,000 only being ex-gratia payment to the Petitioner-widow - It was held that it would be just and proper on the part of the State Respondents to afford a sum of Rs. 2,00,000 to the bereaved
payment/compensation and, accordingly, the Court hereby determined to afford ex-gratia compensation/payment to the tune of Rs. 2 lakhs payable by the Respondents/authorities concerned to the bereaved family of late Tajom Muang, the then Assistant Engineer as financial help to secure the ends of justice, not Rs. 5 lakhs as claimed by the petitioner herein. Hence under the light of the above mentioned cases the counsel pleads the Hon'ble court to consider the appellant's claim for an Ex gratia compensation from the respondents and hence direct them towards commotion of this compensation.
Wherefore, in the lights of facts stated, issues raised, arguments advanced and authorities cited, it is most humbly prayed and submitted before the High Court of Judicature at Allahabad that it may be graciously pleased to exercise jurisdiction over the matter, and adjudge and declare that: a) The contract dated June 20, 2003 had got frustrated and that the appellants are not liable for breach of contract. b) The communication of the firm dated July 6, 2003 and the conduct of the respondents thereafter led to the implied form of variation in the terms of the earlier contract. c) The State of U.P. is liable to remunerate the appellants for the services provided by them. And pass any other order that it may deem fit against the defendant in ends of equity, justice & good conscience. All of which is most humbly and respectfully submitted.
Place: High Court of Judicature at Allahabad Date: -- /-- /20--
S/d COUNSEL FOR THE APPELLANTS