Jasu Sharmas v Rhine Garments

Jatin and Sunayna Sharma are a husband and wife team in business of fashion-garment manufacture under the name ‘Jasu Sharmas’ (hereafter ‘Sharmas’). Jatin takes care of manufacture, and Sunayna is a designer. Sunayna receives a salary from Sharmas. All documents of Sharmas are signed by Jatin Sharma ‘for Jasu Sharmas’. Their unit is located at Pune.

In response to an enquiry dated 1 January 2002 from Rhine Garments (hereafter ‘Rhine’) located at London, Sharmas sent a quotation for supply of garments. They also sent a brochure with photographs of different garments of different styles, each with its code number and price, and ask Rhine to choose the styles and the number of items for each style.

The brochure states that the garments are made from cloth manufactured by various well-known cloth-makers. The brochure introduces both Jatin and Sunayna and their qualifications, and also describes husband and wife as a ‘team’ which makes ‘quality garments’.

Their quotation states the following terms.

1.      The Seller shall sell to the Purchaser garments of the type and at the price indicated in the brochure of such quantity as may be ordered by the Purchaser.

2.      The garments shall be made from cloth manufactured by Rangachari, a world-renowned designer and manufacturer of cloth of traditional designs and material.

3.      The garments shall be delivered to the Purchaser on or before 30 March 2002.

4.      The price shall be paid 15 % on 20 January 2002, and balance on delivery.

5.      The price is inclusive of all taxes and duties levied in India, and freight, insurance and all expenses incidental for transport of goods to London.

6.      Transaction is subject to usual force majeure.

7.      Subject to Pune jurisdiction.

Rhine sent an order according to the quotation and with reference to the brochure, indicating the garments by their codes, and the number of items for each. Rhine also sent with the order a cheque for 15 % of price calculated on that basis, which after conversion amounted to Rs 15 lakhs. Sharmas received this amount. Sharmas placed an order with Rangachari for required cloth and paid an advance of Rs 5 lakhs.

In February 2002, Rangachari died and his business unit stopped manufacture of cloth. It was not known when his unit will commence manufacture.

On 15 February 2002, Sharmas wrote a letter to Rhine: “On account of Rangachari’s sudden and sad demise, it is not possible to procure his cloth. If you choose any other variety of cloth, let us know soon. We can fulfil the order by the decided date”. The letter was signed by Sunayna ‘for Jasu Sharmas’.

Rhine wrote on 19 February 2002: “Kindly return the amount of advance we paid within 15 days.”

On 22 February 2002, Jatin Sharma on behalf of Jasu Sharmas wrote to Rhine: “We are ready to supply the garments according to our contract. Kindly indicate your choice of cloth soon, else we will proceed to make the garments of the same style using similar cloth from alternative sources.” Rhine did not reply.

In April 2002, ‘Jasu Sharmas’ (Jatin Sharma on its behalf) have filed a civil suit at Pune for damages, and claim damages for loss of profit (being 20 % of total contract price), and Rs 5 lakhs being the advance they had paid to Rangachari.

Rhine has appeared and contested the suit interalia on the grounds in alternative: (i) the court at Pune has no jurisdiction, (ii) Sharmas are not a registered partnership, and cannot file suit, (iii) that Sharmas have committed breach, and are liable to pay damages to Rhine being 30 % of the agreed price, which Rhine will claim in other appropriate proceedings, (iv) in any case, the contract has become void upon death of Rangachari, and hence Sharmas cannot claim damages unless Sharmas have refunded to Rhine Rs 15 lakhs.

It may be assumed that it is proved that Sharmas and Rhine earn a normal profit in such contracts of 20 % and 30 % respectively. Other facts stated above are either admitted or sufficiently proved. There are no more facts. Argue for (i) Jasu Sharmas, and (ii) Rhine Garments.

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Relevant laws

Law of contract – offer and acceptance, doctrine of impossibility, contingent contracts, breach of contract and right of rescission, compensation / damages, restitutionary remedies under contract law, interpretation of contracts.

Law of Partnership – what is a partnership, effect of registration.

Civil Procedure Code – jurisdiction of courts.