COMMERCIAL TRANSACTION CASE ANALYSIS P. Aiya Pillai v.AR.A. Shenbaga Nadar and P.V.P.

Valasubramania Nadar through one of its partners V. Rajendran1 By: Pritish Mishra2 Factual Matrix of the Case: Plaintiff entered into composite contract with defendant. The defendant, the appellant herein, placed an order on 28-1-1957, with the plaintiffs-firm for fitting Parkins Diesel Engine to a lorry MDR. 2593 and also for building a body to the said lorry at a cost of Rs. 11000, that the defendant paid Rs. 500 as advance, that as per the order, the plaintiffs fitted the' Parkins Diesel Engine to the lorry and also built a body as ordered and delivered the lorry in or about 16-31957, that as the defendant did not have sufficient money to pay, he executed a promissory note, Ex. A.2, in favour of the plaintiffs on 26-3-1957, agreeing to pay 12 per cent interest, and that after giving credit for a sum of Rs. 718-11 which stood to the defendant's credit in respect of transactions of purchase of spare parts, tools, diesel oil etc., from the plaintiffs, the amount sued for represented the balance due from the defendant. Plaintiff filed a suit for recovery of money by plaintiff. The defendant raised plea of partial failure of consideration. Issues: Was there has a failure of consideration under the suit promissory note? Observations made by the Court: In this case the defence, at the most amounts to a partial failure of consideration, which is not ascertainable in terms of money without further collateral enquiry. From Section 45 of The Negotiable Instrument Act, 1892 this it is clear that a plea of partial failure of consideration is not permissible except in a case in which the failure of consideration in terms of money can be ascertained without any collateral enquiry. In England also the position is exactly the same and a plea of partial failure of consideration in a suit on a negotiable instrument was held inadmissible where the partial failure of consideration cannot be determined in terms of money without further collateral enquiry. In a suit by the plaintiff, the vendor of the goods on the bill of exchange, the defendant contended that at the time of the sale, the plaintiff promised the defendant that the goods should
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AIR1964Mad45 Semester V, Section A, Roll no. 80

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COMMERCIAL TRANSACTION CASE ANALYSIS be of a certain quality, that he bought the goods and accepted the bill on the faith of the plaintiff's promise, that the goods delivered were not of the quality specified but of an inferior quality, that they were of the value and no more, and that except for the said sum the defendant was not liable for the balance on the ground that there was a partial failure of consideration. A partial failure of consideration for a promissory note constitutes no ground of defence. In Gwynne, 3it was held that in a suit by the vendor on certain bills drawn by the vendee for the agreed price of the goods it was not open to the vendees to plead that the goods supplied were of inferior quality and therefore there has been a partial failure of consideration. A plea of partial failure of consideration is open only if the same was ascertainable in terms of money. Where a defendant can insist on a total want of consideration as a defence he may also set up its partial failure or absence as an answer pro tanto, provided that the sum to be deducted be an ascertained and liquidated amount. In view of the above clear statement of the law, we are clearly of the opinion that it. is not competent to the defendant to raise this defence of partial failure of consideration which necessarily involves a collateral enquiry, especially when the contract in this case is indivisible and of a composite character, consisting of a contract for the sale of the Perkins Diesel Engine as well as for work to be done and services to be rendered such as building of a body and fitting the engine to the lorry etc. Judgment: The plaintiffs have performed their part of the contract as contained in the order, Ex. A. 1, and that the plaintiffs never undertook to fit in an imported new Perkins Diesel Engine. On the other hand, they had purchased the necessary parts and assembled the same, fitted them upto the lorry, that the defendant himself has accepted the lorry with the engine so fixed without any objection, and that later on, he has also sold the lorry. Even though his evidence is interested, foe is amply supported by the documentary evidence. The Judge upheld the judgment of its subordinate.

(1809) 2 Camp 346

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COMMERCIAL TRANSACTION CASE ANALYSIS From Section 45 of the Negotiable Instrument Act, 1892 this it is clear that a plea of partial failure of consideration is not permissible except in a case in which the failure of consideration in terms of money can be ascertained without any collateral enquiry. A partial failure of consideration for a promissory note, constitutes no ground of defence if the quantum to be deducted on that account is matter not of definite computation, but of unliquidated damages, as, where a note was given for the plaintiffs' disclosing to the defendant on improvement in certain machinery, which turned out to be less beneficial than was anticipated by the parties. In Glennie v. Imri, 4 and Tye v. Gwynne5it was held that in a suit by the vendor on certain bills drawn by the vendee for the agreed price of the goods it was not open to the vendees to plead that the goods supplied were of inferior quality and therefore there has been a partial failure of consideration. 'The buyer's right to insist on a reduction of price on a breach of warranty cannot be made available if he has given a negotiable security for the price, and the action be brought on the security. He is driven in such a case to a cross-action or counter claim as his only remedy. The law does not permit unliquidated and uncertain claims to be set up in defence against the liquidated demand represented by a bill or note. But he may set up in defence a total failure of consideration as where a condition of quality of description has not been performed. In Byles on Bills6, the learned author states thus:'Where a defendant can insist on a total want of consideration as a defence he may also set up its partial failure or absence as an answer pro tanto, provided that the sum to be deducted be an ascertained and liquidated amount.' The defendant is not competent for the defendant to raise this defence of partial failure of consideration which necessarily involves a collateral enquiry, especially when the contract in this case is indivisible and of a composite character.
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(1839) 3 Y & C. Ex. 436 : 160 ER 773 (1809) 2 Camp 346 6 Byles on Bills, 21st Edn, page 151

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