Académique Documents
Professionnel Documents
Culture Documents
Before
THE HONBLE HIGH COURT OF BOMBAY, BOMBAY
/2007)
Most respectfully submitted to the Honble Chief Justice and other Judges of High Court of
Judicature of Bombay
R D
TABLE OF CONTENTS
Table of Contents.(i)
Index of Authorities(ii-iii)
Acts(ii)
Books & Articles (ii-iii)
Cases.(iii)
Websites............(iv)
Abbreviations(iv)
Statement of Jurisdiction................(1)
Statement of Facts...(2)
Issues Involved.(3)
Summary of Arguments..(4-5)
Arguments Advanced(6-19)
Issue 1(6-7)
Issue 2..........(8-10)
Issue 3(11-12)
Issue 4(13-15)
Issue 5(16-17)
Issue 6(18-19)
Prayer.(20)
MEMORIAL ON BEHALF OF THE PLAINTIFF
R D
INDEX OF AUTHORITIES
Acts:
Books:
1. Pollock & Mullas revised and edited by Nilima Bhadbhade, 14th Edition: Indian
Contract Act, 1872
2. Dr. R.K Bangias: Indian Contract Act
3. Avtar Singhs: Contract and Specific Relief Act
4. M.C Bhandaris: Laws of Contract
5. Universals: Concise Commentary The Indian Contract Act, 1872 (9 of 1872) With
6.
7.
8.
9.
Articles:
R D
Cases:
Websites:
1. www.lexisnexis.com
2. www.indiankanoon.com
3. www.advocatekhoj.com
4. www.vakilno1.com
5. www.manupatra.com
6. www.outlaw.com
7. www.wikipedia.org
8. www.law-dictionary.com
9. www.mondaq.com
10. www.legalmatch.com
MEMORIAL ON BEHALF OF THE PLAINTIFF
R D
Abbreviations:
R D
STATEMENT OF JURISDICTION
The Honble High Court of Bombay has jurisdiction in the instant case under Section 6, Section
9, Section 15 and Section 20(a) of the Code of Civil Procedure, 1908.
Section 6 of the CPC, 1908
Pecuniary Jurisdiction Same in so far as is otherwise expressly provided, nothing herein
contained shall operate to give any court jurisdiction over suits, the amount or value of the
subject matter of which exceeds the pecuniary limits(if any) of its ordinary jurisdiction.
Section 9 of the CPC, 1908
The court shall (subject to the provisions herein contained) have jurisdiction to try all suits of
civil nature excepting suits of which their cognizance is either expressly or impliedly barred.
Section 15 of the CPC, 1908
Every suit shall be instituted in the court of lowest grade competent to try it.
Section 20(a) of the CPC, 1908
Subject to the limitations aforesaid, every suit shall be instituted in court within the local limits
of whose jurisdiction:a- the defendant or each of the defendants where there are more than one, at the time of the
commencement of the suits, actually or voluntarily resides, or carries on business, or personally
work for gain.
R D
STATEMENT OF FACTS
1. NSCC is a growing private equity firm with an annual turnover of Rs. 200 crore for the fiscal
year 2005-2006. It is an Indian Company with its base in Mumbai. RCC, also an Indian
Company is a reputed name in the real estate industry. Several building contracts for top
corporate houses have been executed by it for years.
2. NSCC & RCC entered into a contract to build a corporate house for NSCC by December 2006
with the total cost of the project Rs. 60 crore, payable in four equal tranches. A bank guarantee,
which was 50% of the value of contract or Rs. 30 crore was also required to be furnished by
RCC in favour of NSCC to cover any breach on their part.
3. The construction work was started as per the schedule in Oct, 2005 and on 10th June 2006 a
fire broke out & caused severe damage to building and thereby delaying the work. A committee
setup found that reason of fire was the position of machinery kept by RCC, but it was not
concluding whether RCC was at fault or not. It also stated that there would be at least 20%
increase in cost of completion of contract and who would bear the extra cost was to be decided in
a meeting which was never held.
4. After completion of project in March 2007, RCC claimed last tranche of payment and Rs 5
crore as additional cost for delay and asked NSCC to refer to clause 11 & 12 which stated RCC
will not be liable for any delay or damaged and further RCC can levy charges in case where
delay occurred due to circumstances outside of the control of RCC
5. NSCC stated, RCC has failed to perform his side of contractual obligations and the delay has
caused loss to then and thats why they claimed Rs 50 lakhs and invoked the bank guarantee on
30th Mar, 2007 and collected Rs 50 lakhs from the bank.
6. On 20th may 2007 RCC filed a Civil Suit in the Bombay HC, claiming Rs15 crore pending of
final tranche of payment, Rs 5 crore for additional cost arose as consequence of accident, Rs50
lakh amount collected by NSCC under bank guarantee, interest on all these amount and Rs 5
crore as compensation of loss arising from libelous statement made by CEO of NSCC alleging
RCC to have performed in bad faith. The matter is fixed for final hearing in the Bombay HC.
MEMORIAL ON BEHALF OF THE PLAINTIFF
R D
ISSUES INVOLVED
1234-
of contract?
5- Whether RCC is entitled to compensation for libelous statement?
6- Whether RCC is liable for consequential loss that arose due to delay in completion
of construction?
R D
SUMMARY OF ARGUMENTS
ISSUE 4- Whether RCC is entitled to damages caused due to delay in construction and
breach of contract?
R D
RCC is entitled to damages caused due to delay in construction and breach of contract because
there was a breach of contract on part of NSCC and RCC had performed its part of contractual
obligation promised under the contract, the non payment for which had put RCC at complete loss
and also suffered loss due to withholding.
ISSUE 6- Whether RCC is liable for consequential loss that arose due to delay in
completion of construction?
RCC is not liable for any consequential loss fire broke out by reason of force majeure and RCC
was not at fault for delay and fire. There was no breach on part of RCC thus not liable for any
actual or consequential losses and NSCC had knowledge of fire and delay.
R D
ARGUMENTS ADVANCED
R D
A breach of contract occurs when a party thereto renounces his liability under it, or by his own
act makes it impossible that he should perform his obligation under it or totally or partially fails
to perform such obligation.
1.1 Renounciation of liability by NSCC
As per the contract agreement NSCC was liable to make final settlement to RCC on completion
of construction of corporate house. But in violation of terms and condition of contract, NSCC
refused to make final tranche of payment, on completion of construction on non-justifiable
grounds.
1.2 Partial failure to perform obligation imposed under the contract
As per definition of breach of contract, the failure in performing obligation may be total or
partial under the contact. Thus NSCC partially failed to perform its part of obligation imposed
under the contract by non-payment of final settlement to RCC. Thus resulting in breach of
contract.
1.3 Refutation made upon contentions of RCC was based upon non-justifiable grounds
NSCC refuted the contentions made by RCC by stating that construction had not been completed
as per schedule agreed under contract and due to delay in construction it had suffered loss of 50
lakhs as a rental charges of leased office premise. But these reasons for non-performing of his
part of promise were absolutely non-justifiable due to following reasons:
A. NSCC was acquainted with fire in the building and the delay that was supposed to be
caused.
B. NSCC showed his negligence towards deciding the fault of RCC for fire in building.
C. NSCC had knowledge of delay, and the contract was voidable at his option, but he did not
take any action at that time and allowed the continuing of contract.
R D
It is humbly submitted before the honble high court that the withholding of final tranche of
payment by NSCC was not at all justified. The terms and condition of contract were worded as
below:
On 15th September 2005 NSCC and RCC signed the contract that provided:
NSCC will make payment in four equal tranches of Rs 15 crore each, in October-2005,
February-2006, june-2006. The final settlement was to be made in December-2006, when the
project was completed and was handed over to NSCC.
As per the terms of the contract NSCC was required to make final tranche of payment as soon as
the construction of corporate house was completed.
The construction of corporate house was completed by RCC in March 2007 three months behind
the schedule. Where RCC was not responsible for delay as its fault was not proved by the
investigating committee. Therefore on completion of construction RCC is entitled to final
tranche of payment as per terms of the contract. Thus withholding of final tranche of payment by
NSCC where substantial performance of promise has taken place , is totally non-justifiable.
According to Fordham law review2, article 5 it has stated:
Sometimes the withholding of payment will be considered to be a breach of the contract .the
terminology will remain the same, however even though the withholding party is also
technically a breaching party. In a limited number of situations the withholding party will
withhold payment without any breach or justification by the other party.
Under the above article court examined issues of withholding by applying Doctrine of
Constructive condition and Material breach.
2
Volume 62 issue 1. The problem of withholding in response to breach: a proposal to minimize risk in continuing
contract. William J. Geller
R D
Under the contract if a party fails to substantially perform the contract when its performance is
due the party has materially breached the contract. In event of a material breach the constructive
condition of performance has not occurred. The injured party then has a right to cancel the
contract and terminate the remaining executory obligation of each side. The injured party may
then also sue the breaching party to recover damage incurred as a result of total breach of
contract. An example of the operation of this doctrine is provided by K & G Construction v.
Harris3
As per this doctrine of constructive condition and material breach following deductions can be
made:
1
2
3
4
5
Thus it can be concluded on the basis of above doctrine that withholding of final tranche of
payment by NSCC is not justified.
In case of M & W Masonery Constr, Inc. v. Head4:
The contractor improperly withheld payment of sub-contractor that had substantially
performed. Therefore it was held if a material breach does not precede a withholding;
3
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 10
This is a second standard used by court allows withholding when the finder of facts determines
that the withholding is justified. Court applying this have approved jury instruction that treat the
determination of whether a party was justified in withholding payment as entirely question of
facts.
In case of Morgan v. Singley5 , according to facts of case the contractor was justified in
withholding payment of subcontractor.
Considering the facts of the case the withholding of payment by NSCC was not justified for the
following reasons:
1. The substantial delay in the completion of construction of corporate house was due to fire
that broke out in the incomplete structure was accidental and was out of control of RCC
to avoid it.
2. No fault of RCC could be concluded by the committee of officers of NSCC & RCC set
up to investigate fire.
3. NSCC had knowledge of fire and substantial delay but no action was taken by NSCC for
recovery of losses and for further performance of contract at that moment.
4. NSCC did not take any initiative in deciding fault of RCC which was recommended by
investigating committee neither it hold a meeting in which it was to be decided as to who
is to bear extra cost.
5. NSCC allowed the further performance of contractual obligation on part of RCC without
any objection and further condition.
6. As per the promise made under the RCC performed its contractual obligation and the
construction was finally completed in March 2007.
5
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 11
Guarantee-Section 126 of ICA, 1872, states that a contract of guarantee is a contract to perform the promise or
discharge the liability of third person in case of his default.
7
AIR 1992 SC 1066.
MEMORIAL ON BEHALF OF THE PLAINTIFF
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 12
1.2003 3 Mh LJ 163
AIR 2006 DEL 1035(NOC)
10
(1999) 8 SCC 436: AIR 1999 SC 3170
11
Force Majeure- Standard clause found in construction and supply contracts, it exempts the contracting parties from
fulfilling their contractual obligations for causes that could not be anticipated and/or are beyond their control. It
essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the
control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God (such as
hurricane, flooding, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations
under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but
only suspends it for the duration of the force majeure.
9
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 13
4. Whether RCC is entitled for damages caused due to delay in construction and breach of
contract?
It is humbly submitted before honble high court that RCC is entitled to additional charges of Rs.
5 crore for delay in construction for the following reasons:
1. The delay in construction was by reason of force majeure, the fault of RCC was not
concluded by investigation committee.
2. The meeting was supposed to be held for deciding that who shall bear the extra cost of
completion which would increase by atleast 20% due to loss by fire but the meeting was
never convened by NSCC.
3. The contract clause 11 & 12 states the following:
11.0 RCC will not be liable for any loss or damage arising out of the work carried out
under this contract.
12.0 further more RCC is entitled to levy additional charges (I) extra work is required to
prepare project before handing over the finished project.(II) increase in costs arising from
delay in completion of project, where delay occurs from cause outside the contract of
RCC.
Therefore in absence of any fault and any meeting for deciding that who shall bear the extra cost
the clause 11 & 12 of contract will be referred here. Thus in light of clause 11 & 12 RCC is
entitled to additional cost caused due to delay in construction. As clause 12 mentions that RCC is
entitled to levy additional charges for increase in cost arising from delay in completion of project
where delay occurred from causes outside the contract of RCC.
4.1 RCC is entitled to damages caused due to breach of contract
RCC is entitled to damages claimed in suit filed, as there is a breach of contract on part of
NSCC. The Indian Contract Act, 1872 provides for specific provision relating to relief which can
be claimed by injured party from breaching party who had failed in performing its contractual
obligation or a promise made under the contract. Such provision can be read as follow:
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 14
When a contract has been broken, the party who suffers by such breach is entitled to receive
from the party who has broken the contract, compensation for loss or damages caused to him
thereby, which naturally arose in usual course of things from such breach or which parties knew,
when they made the contract , to be likely to result from breach of it.
In a case of AT Brij Paul Singh v. State of Gujarat12, the Supreme Court came to the conclusion
that:
Since works and building contracts are undertaken only with a view of earning profits, the
party committing the breach would be liable for contractors loss in terms of expected profits.
PATANJALI SASTRI J of Supreme Court observed in Pannalal Jankidas v. Mohanlal13:
That the party in breach must make compensation in respect of the direct consequences flowing
from breach and not in respect of loss or damage indirectly or remotely caused.
Section 73 incorporates two rules of Hadley v. Baxendale14:
This section clearly lays down two rules related to whether compensation is recoverable for any
loss or damage:
1. Arising naturally in usual course of things from breach, or
2. Which the parties knew at the time of contract as likely to result from breach.
On basis of section referred above and various court decision quoted, it can be said that RCC is
entitled to damages caused by breach of contract. For the following reasons:
12
4.2 Failure of NSCC in making final tranche of payment to RCC, after completion of
project (breach of contract)
The contract terms mentioned that NSCC will make final settlement when the project was
completed. But when project was completed and RCC claimed for its final payment the NSCC
refused to make payment and withheld the final tranche of payment for non justifiable reasons.
MEMORIAL ON BEHALF OF THE PLAINTIFF
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 15
Therefore resulting in breach of contract by not fulfilling the contractual obligation imposed
under the contract and failed in performing the promise made under the contract.
4.3 RCC performed his part of contractual obligation and any non-payment by NSCC
would bring RCC in loss
The building contract undertook by RCC in completion of its construction RCC the contractor
had incurred many costs in construction such as labour cost , material cost , machinery cost,
equipment cost etc. apart from it lots of effort and time on project and had also borne extra cost
which occurred due to the fire which was force majeure. In case of non-payment of final
settlement to be paid on completion of project promised as per contract by NSCC would put
RCC to a great loss and would upset many a settled expectation of RCC. Therefore RCC is
entitled to all compensation and damages due to breach of contract including interest on all
amount for wrongly withholding its payment.
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 16
defamation of RCC, which is a libel and caused a great harm to reputation and name of RCC in
the business world. Therefore RCC is entitled to compensation for loss
due to defamation caused by NSCC.
5.1 Defamatory statement was published in a popular business magazine
The defamatory statement against RCC was published in a popular business magazine under an
article containing an interview with CEO of NSCC. Such a defamatory statement had a vast
adverse impact on the reputation and name of RCC established in real estate industry
RCC is a reputed name in the real estate industry15 and has executed several prestigious building
contracts for top corporate houses over the years. Such a defamatory statement against RCC
resulted in lowering the reputation and name of RCC, for which it took years for establishing
such name and reputation by the hard work and efforts.
In case of New York Times Co. v. Sullivan16, the U.S Supreme court found:
The New York times guilty of libel for printing an advertisement that criticized Alabana
officials.
In D.P Choudhary v. Manjulata17,
It was that all defamatory words are actionable per se and in such a case general damages will
be presumed.
15
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 17
The statement made by CEO of NSCC in his interview was injurious to the reputation and name
of RCC in the real estate industry as RCC was a reputed name in the real estate industries and
has executed various prestigious building contracts. Any such statement made in respect of RCC
will result in a fall of its business and its overall reputation in the real estate industry.
18
6. Whether RCC is liable for consequential loss that arose due to delay in completion of
contract?
It is humbly submitted before the Honble court that RCC is not liable for any consequential loss
that arose due to delay in completion of construction because the delay was not deliberately
caused.
The fire that broke out in the incomplete structure was by reason of force majeure i.e., due to
unforeseen circumstances which could not have been avoided after due care and caution and
such circumstances were out of control of RCC. Thus when there was no breach and fault on part
of RCC, it cannot be made liable for any loss.
The Indian contract act, 1872 provides for specific provision for relief in form of compensation
and damages enshrined under section 73.but such relief can only be sought only in case of breach
of contract and no other circumstances.
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 18
Considering the facts of the instant case, it can be said RCC is not liable for any consequential
loss for the following reasons:
6.1 RCC was not responsible for fire and subsequent delay in completion of construction
RCC was not responsible for fire that broke in an incomplete building because it was by reason
of force majeure; the unforeseen circumstances could not have been avoided anticipated by RCC.
It was not under control to avoid such circumstances. Thus the delay in completion of
construction of corporate house was not deliberately caused by RCC. Thus it cannot be made
liable for consequential loss considering it breach of contract.
In Toepfer V. Cremer19: fire broke out, it was held that:
Contactor was not responsible for extra cost, presence of force majeure.
19
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 19
PRAYER
In the light of the issues raised, arguments advanced and authorities cited, may this Honble
Court be pleased to:
1. Pass an order against NSCC to pay the sum of Rs. 15crores, the amount of final tranche
of payment, Rs 5crores for the extra cost that was caused due to delay in construction, Rs
50lakhs being the amount collected as bank guarantee and interest on these amounts.
R D
I N T E R S E M E S T E R M O O T C O U R T C O M P E T E T I O N - 2 0 1 4 | 20
2. Pass an order asking NSCC to compensate RCC for making libelous statements against
its reputation.
3. Declare that RCC was not at fault and NSCC made default in relation to abiding with the
terms of the contract.
AND
Pass any other order that it deems fit in the interest of Justice, Equity, and Good Conscience.
And for this, the Plaintiff, as in duty bound, shall humbly pray.