Contract Law

Karsandas H. Thacker v. Saran Engineering Co. Ltd.

AIR 1965 SC 1981

Facts

Karsandas contracted with Saran Engineering for the supply of 200 tons of scrap iron.
Saran failed to deliver the scrap.
Before or around the same period, Karsandas had entered into a separate resale arrangement with another buyer.
Because Saran did not deliver, Karsandas could not perform the resale contract.
Karsandas claimed the profit he would have earned on that resale.
Saran had not been sufficiently informed when the original contract was made that:
the scrap was intended for a particular resale contract; or
failure to deliver would expose Karsandas to that specific loss.
The ordinary controlled market price had not materially increased.

Whether the buyer could recover profit lost under a separate resale contract.
Whether such loss naturally arose from the breach or depended on special knowledge.

Section 73 permits recovery for:
loss naturally arising in the usual course; and
special loss within the parties’ contemplation.
Profit under a particular sub-contract is special loss unless the seller knew of that transaction and could reasonably contemplate liability for its failure.
General knowledge that goods may be resold is not always enough.
The claimant must establish causation, remoteness and actual loss.

In an ordinary sale of scrap, the natural measure would be the difference between:
the contract price; and
the prevailing market price at breach.
Since the controlled market rate remained substantially the same, Karsandas could not show ordinary market loss.
The claimed profit arose only because of his separate agreement with the subsequent purchaser.
That transaction was not communicated to Saran in a manner showing that Saran accepted responsibility for its profitability.
Merely knowing that a trader purchases for resale does not necessarily make the seller liable for every special onward bargain.
The claimed loss therefore did not arise naturally from non-delivery.
It depended on undisclosed special circumstances.
The Court consequently treated the resale profit as too remote under Section 73.

The Supreme Court rejected the claim for lost resale profit.
No ordinary market loss was proved, and the special resale arrangement was not sufficiently communicated.
Use this case for: profits under an undisclosed sub-contract are too remote under Section 73.