Memorial for Contracts Law

Before

The Hon’ble City Civil Court, Mumbai.

In the Matter of

M/s DEF
Hospitality_______________________________________Petitioner

V.

ABC Textiles Private Limited______________________________Respondant

CIVIL CASE __________OF 2021

CASE CONCERNING BREACH OF CONTRACT AND RELATED ISSUES

Name: Aashka Vora

Section B

Enrolment No.: 2020 116

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 Memorial for Contracts Law

Written Submission on the Behalf of Defendant / Respondent

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 Memorial for Contracts Law

Table of Contents
List of Abbreviations..........................................................................................3

Index of Authorities............................................................................................4

Statement of Jurisdiction...................................................................................5

Statement of Facts...............................................................................................6

Statement of Issues.............................................................................................8

Summary of Arguments.....................................................................................9

Body of Arguments...........................................................................................10
1. WHETHER DELAY IN PERFORMANCE DUE TO FORCE MAJEURE WOULD BE
CONSIDERED THE MATERIAL BREACH OF CONTRACT AND WOULD ENTITLE
PETITIONER TO TERMINATE THE CONTRACT?...................................................................
………………………………..10

1.1 Pandemic is a natural calamity & it comes under Force Majeure.....................................10

2. WHETHER DAMAGES ASKED ARE FAIR?
………………………………………………..11

2.1 At the Time of Delivery of First Lot................................................................................11

2.2 Frustration on Specific Grounds......................................................................................11
2.3 Lack of a clause claiming Damages.................................................................................12
PRAYER............................................................................................................13

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List of Abbreviations

 §: Section
 ¶: Paragraph
 V.: Versus
 Hon’ble: Honourable
 Pvt.: Private
 Ltd.: Limited
 SCC: Supreme Court Cases
 AIR: All India Reporter
 SCR: Supreme Court Reporter
 Art.: Article
 SC: Supreme Court
 SCR: Supreme Court Report
 ed.: Edition
 Re: In the matter of
 Ors.: Others
 CBI: Central Bureau of Investigation
 S/d: Signed

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 Memorial for Contracts Law

Index of Authorities

CASES

1. Joseph Constantine Steamship Line Ltd. V. Imperial Smelting Corpn Ltd.,1942 AC 154
(HL)
2. McCardie J in Blackburn Bobbin Co v T.W Allen & Sons, (1918) 2 KB 467 (CA)
3. KJS Ahluwalia and Ors Versus State of Odisha and Others 2020 SCC Online Ori 916
4. Ramanand and Others Versus Dr. Girish Soni and Another, AIR 2020 Del 80

BOOKS REFERRED

1. BLACK’S LAW DICTIONARY (9th ed. 2009)

2. CONTRACTS AND SPECIAL RELIEF BY AVTAR SINGH (12th ed.)

STATUTES AND LEGAL PROVISIONS REFERRED

1. The Bombay City Civil Court Act, 1948

2. The Indian Contract Act, 1872
3. The Sale of Goods Act, 1930

WEBSITES REFERRED

1. www.scconline.com
2. blog.ipleaders.in
3. www.barandbench.com
4.

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 Memorial for Contracts Law

Statement of Jurisdiction

It is humbly submitted that the respondent has approached the Hon’ble Court under section 3
of The Bombay City Civil Court Act, 1948.

Section 3: The [State] Government may by notification in the Official Gazette,

establish for the Greater Bombay a court, to be called the Bombay City Civil Court.
Notwithstanding anything contained in any law, such court shall have jurisdiction to
receive try and dispose of all suits and other proceedings of a civil nature [not
exceeding rupees one crore in value] and arising within the Greater Bombay.

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Statement of Facts

1. “ABC Textiles Private Limited (‘ABC Textiles’) is a major manufacturer of

bedsheets, hand towels and bath towels with its registered oce in Mumbai. It boasts
some of India's top hotels and resorts as its esteemed clients that purchase the same
via yearly bulk orders. In January 2020, M/s DEF Hospitality (‘DEF’), one of the
largest chains of hotels in the country, placed a yearly bulk order of bed sheets, hand
towels and bath towels totalling INR 1 Crore.
2. DEF shared its standard procurement contract with ABC Textiles, and it signed the
same. The contract did not have an aggregate liability cap. It also did not have a
clause disclaiming liability of either party for indirect or consequential losses or
damages, loss of profits, loss of reputation and loss of business.
3. The order was required to be delivered in two lots –
(i) first lot comprising 80% of the order value that was needed to be delivered in
February 2020; and
(ii) the second lot comprising the remaining 20% of the consignment value that was
required to be delivered in June 2020. The contract had a penalty of 20% of the
relevant consignment lot value if the quality was substandard and did not meet the
specific quality requirements mentioned in the contract.
4. The contract also had a penalty of INR 10,000/- for every week of delay in
consignment delivery. The contract also had a force majeure clause i.e., neither party
was liable for factors beyond its reasonable control like act of good, flood, earthquake
etc. However, a ‘pandemic’ was not expressly mentioned in the force majeure clause.
The contract had a termination clause that stated that a party may terminate the
contract for cause if the other party commits a material breach of its obligations. The
contract also mentioned that timely delivery of the consignment lots was the essence
of the contract.
5. ABC Textiles delivered the first lot on time and the timely delivery of the
consignment was appreciated by DEF. As per the terms of the contract, DEF paid for
the first lot in full within fifteen (15) days of receipt of the delivery. However, around
mid-February 2020, some of the local news media and local newspapers in Mumbai
reported that guests in DEF’s flagship hotel in Mumbai had reported about the poor

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quality of the hand towels and bath towels. Some of the customers had also uploaded
pics and videos on social media platforms highlighting the poor quality of the hand
towels and bath towels.
6. Further, with the onset of COVID-19 and the resultant lockdown imposed in India
around the last week of March 2020, ABC Textiles could not import cotton fabric of
the requisite quality to meet the quality requirements under the contract and also
started facing labour availability constraints. Realizing that it will not be able to meet
the June 2020 deadline, ABC Textiles wrote a letter bringing the matter to the notice
of DEF and requested for an extension of time during the lockdown period to meet the
delivery commitment for the second consignment.
7. However, DEF did not bother to reply to the said letter. ABC Textiles also send
multiple emails to the said elect but there was no reply from M/s DEF Hospitality. In
June 2020, DEF sent a letter to ABC Textiles stating the delay in delivering the
second lot and highlighted the poor quality of the first consignment and canceled the
contract with immediate effect.
8. DEF filed a suit against ABC textiles claiming –
(i) Rs. 16 lacs towards 20% penalty on account of poor quality of the first
consignment lot;
(ii) Rs. 25 lacs as damages on account of non-delivery of the second lot; &
(iii) Rs. 10 lacs as damages for loss of business, loss of revenue and loss of goodwill
due to the circulation of videos and posts of poor towel quality in the news and social
media.
9. ABC Textiles challenged the claim stating that –
(i) it was not bound to pay either the 20% penalty or the claim of Rs.10 lacs as the
first consignment was of good quality and had been accepted by DEF on delivery;
(ii) the delay in delivery of the second consignment was due to COVID-19 and
resultant lockdown by the Central Government and hence the same was a Force
Majeure event; and
(iii) the procurement price of cotton towels has fallen by at least 20% due to the
severe economic impact of COVID-19 pandemic and hence DEF had not suffered any
loss due to its inability to deliver the second consignment.

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Statement of Issues

ISSUE 1: WHERE TIME IS AN ESSENCE OF CONTRACT, WHETHER DELAY IN

PERFORMANCE DUE TO FORCE MAJEURE WOULD BE CONSIDERED THE
MATERIAL BREACH OF CONTRACT AND WOULD ENTITLE DEF TO
TERMINATION OF CONTRACT?

ISSUE 2: WHETHER THE DAMAGES SEEKED ARE FAIR?

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Summary of Arguments

ISSUE 1: WHETHER DELAY IN PERFORMANCE DUE TO FORCE MAJEURE

WOULD BE CONSIDERED THE MATERIAL BREACH OF CONTRACT AND
WOULD ENTITLE PETITIONER TO TERMINATE THE CONTRACT?

A pandemic resulting into a nation-wide lockdown which brought all movement and
industrial activities to standstill, is beyond control of the party. The pandemic comes under an
‘natural calamities.’ This made performance of contract impossible for ABC Pvt. Ltd.

ISSUE 2: WHETHER DAMAGES ASKED ARE FAIR?

The 16 lakhs demanded on account of poor quality of the first consignment lot is not justified
because they signed off on the goods at the time of delivery. There is frustration of contract
on specific grounds which made performance of contract impossible, and hence the demand
of 25L is not justified. It is nowhere mentioned in the clause that there will be a liability of
either party for indirect or consequential losses or damages, loss of profits, loss of reputation
and loss of business. 1

1
Statement of facts, #2

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Body of Arguments

1. WHETHER DELAY IN PERFORMANCE DUE TO FORCE MAJEURE WOULD

BE CONSIDERED THE MATERIAL BREACH OF CONTRACT AND WOULD
ENTITLE PETITIONER TO TERMINATE THE CONTRACT?

It is humbly submitted before this Hon’ble Court that the delay in the performance of contract
by the defendant due to the force majeure would not be considered as the material breach of
contract and therefore would not entitle DEF Hospitality to termination of contract. A
pandemic is a natural calamity. Further, Force Majeure would implicate the lack of control by
parties, and how it applies in this case.

1.1 PANDEMIC IS A NATURAL CALAMITY & IT COMES UNDER FORCE MAJEURE

Even though, a pandemic wasn’t expressly mentioned in the force majeure clause of the
contract 2, the pandemic can be identified as a force majeure event. Senior Advocate Mr.
Mukul Rohatgi3, said that the spread of the COVID-19 pandemic and its devastating
consequences have been acknowledged and recognized by the Government of India as a force
majeure event. The Government of India has in this behalf from time to time introduced
several beneficial measures in the overall interest of the economy of the country. Reference is
made to various orders/directions and notifications issued in this regard by different
Ministries of the Government of India, which are as follows:

a. Office Memorandum dated 19.02.2020 bearing No. F.18/4/2020-PPD by the

Department of Expenditure Procurement Policy Division, Ministry of Finance, Govt.
of India (Annexure-24 at Pg. 28 of Additional Affidavit by Petitioner dated
25.11.2020):

“Spread of Coronavirus should be considered as a natural calamity and force majeure

may be invoked.”

Hence, it is clear that the Pandemic comes under a natural calamity, and beyond the control
of both parties.

2
#6, Statement of facts
3
KJS Ahluwalia and Ors Versus State of Odisha and Others 2020 SCC Online Ori 916

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Under Ramanand and Ors v Dr. Girish Soni and Another 4, the Delhi High Court held that
the COVID Pandemic comes under the force majeure clause, and the force majeure clause
would be governed by the Section 32 of the Indian Contract Act, 1872, which talks about
contingency of an event happening. Hence, it is very clear that the pandemic is enough
cause to come under the ambit of force majeure.

2. WHETHER DAMAGES ASKED ARE FAIR?

It is most humbly submitted by the counsel of the defendant before this Hon’ble Court that
the damages filed by the petitioner are not fair. The damages of Rs.16 lakhs filled towards the
20% penalty on account of poor quality of the first consignment lot are not valid. The lack of
a clause disclaiming liability of either party for indirect or consequential losses or damages,
loss of profits, loss of reputation and loss of business, in their contract.

2.1 AT THE TIME OF DELIVERY OF FIRST LOT

Under the §31 of The Sale of Goods Act, 1930, it is clearly mentioned that the buyer has a
right to reject the goods if they do not meet the requisite quality and quantity as decided upon
in the contract. This has to be at the time of delivery. The first lot was delivered at the
stipulated time, which was appreciated by the petitioner 5, and the payment, as decided, was
made. The petitioner owed it to themselves to have checked the quality of good at the time of
delivery, and reject the goods if they didn’t meet the standards. Hence, damages filed as a
20% penalty on account of poor quality of the first consignment lot are not valid.

2.2 FRUSTRATION ON SPECIFIC GROUNDS

Damages worth Rs. 25 lakhs for non-performance of contract due to the failure in delivery of
the second consignment cannot be filed as the force majeure clause was invoked. As argued
in 1.1 6
above, even though pandemic wasn’t expressly mentioned in the force majeure
clause, it qualifies as a natural calamity and a force majeure event. The contract has deemed
frustration on specific grounds of change in circumstances and government or administrative
intervention.

4
Ramanand and Others Versus Dr. Girish Soni and Another, AIR 2020 Del 80
5
#5, Statement of Facts.
6
Sub-Issue 1.1 under Argument 1.

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a) Change of Circumstances.
Under circumstances which make the performance of the contract impossible or at the
time contemplated, a contract can be frustrated. 7 In this case, the pandemic gave rise
to a lot of issues for ABC Textiles, as was communicated by them in a letter and
various emails, to which the petitioner did not bother replying. 8 They had difficulty in
procuring raw material, non-availability of labour, transport and various logistical
issues, which made the performance of the contract at the stipulated time, impossible.

b) Government or administrative intervention

A contract will be dissolved when legislative or “administrative intervention has so
directly operated upon the fulfilment of the contract for a specific work as to
transform the contemplated conditions of performance.” 9
The nationwide lockdown
counts as government intervention enough, to fall under the frustration of contract.

Due to the above-mentioned reasons, claiming for Rs. 25 lacs as damages on account of non-
delivery of the second lot, is completely out of reach and invalid.

2.3 LACK OF A CLAUSE CLAIMING DAMAGES

Under the contract made between ABC Textiles and DEF Hospitality, there was no clause
disclaiming liability of either party for indirect or consequential losses or damages, loss of
profits, loss of reputation and loss of business. Hence, under the suit filed by the petitioner
against ABC Textiles, claiming Rs. 10 lacs as damages for loss of business, loss of revenue
and loss of goodwill due to the circulation of videos and posts of poor towel quality in the
news and social media, is a stretch. ABC Textiles is not liable for the bad publicity that DEF
faced due to its own negligence in checking the quality of goods.

7
Viscount Maugham in Joseph Constantine Steamship Line Ltd. V. Imperial Smelting Corpn Ltd.,1942 AC 154
(HL)
8
#6 and #7 of Statement of Facts.
9
McCardie J in Blackburn Bobbin Co v T.W Allen & Sons, (1918) 2 KB 467 (CA)

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 Memorial for Contracts Law

PRAYER

Therefore, in light of the issues raised, arguments advanced and authorities cited, it is
requested that this Hon’ble City Civil Court of Mumbai be pleased to adjudge and declare:

1. The delay in performance due to force majeure would not be considered the material
breach of contract and would therefore would not entitle DEF to termination of
contract.
2. The damages asked are not fair.

And Pass any other Order, Direction, or Relief that it may deem fit in the Best Interests of
Justice, Fairness, Equity and Good Conscience. For This Act of Kindness, the
Respondent Shall Duty Bound Forever Pray.

Date: 21.5.2021 S/d …………………………

Place: City Civil Court, Mumbai. (Counsel for Respondent)

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