46. A enters into a contract with B to supply iron to be delivered in four monthly installments of about 150 tons each and supplied only 25 tons in the first month. The buyer refuses to accept delivery. Examine the rights of the parties.

1. Facts of the Case

• A and B enter into a contract for the supply of iron.
• The contract specifies four monthly installments of 150 tons each.
• In the first month, A supplies only 25 tons instead of 150 tons.
• B refuses to accept delivery due to short supply.
• The dispute revolves around whether B can reject the delivery and whether A can claim price for the delivered quantity.

2. Issues in the Case

1. Whether B is justified in refusing delivery of 25 tons instead of 150 tons under the Indian Contract Act / Sale of Goods Act, 1930.
2. Whether the partial delivery constitutes breach of contract.
3. Whether A can claim payment for the quantity delivered.
4. What are the rights and remedies of the parties in case of installment contracts.

3. Legal Principles Covered to Support Case Proceedings and Judgements

Relevant Provisions:

• Section 32, Sale of Goods Act, 1930 – Installment Contracts:
  “Where there is a contract for the sale of goods to be delivered by installments, and default is made in respect of any one installment, the contract may relate to the particular installment or entire contract, depending on the nature of the default.”
• Section 32(2), Sale of Goods Act, 1930:
  “If the default is in respect of a particular installment, the buyer may reject only that installment unless the default substantially affects the whole contract.”
• Section 55, Indian Contract Act, 1872 – Remedies for Breach:
  “When a party fails to perform his promise in a contract, the other party is entitled to claim damages or refuse performance, depending on the circumstances.”

Legal Principles and Analysis:

1. Nature of Installment Contract:
   • The contract for monthly installments of 150 tons is an installment contract.
   • Partial delivery of an installment does not automatically entitle the buyer to reject the entire contract.
2. Right to Reject Delivery:
   • Under Section 32(2), the buyer (B) may reject only the installment that is defective or incomplete.
   • Since A delivered 25 tons instead of 150, B may reject the first installment.
   • B cannot refuse future installments if A performs subsequent deliveries according to the contract.
3. Obligation of Seller:
   • A must deliver each installment in full, according to the agreed quantity.
   • A may be liable for damages for short delivery for the first installment.
4. Obligation of Buyer:
   • B must accept future installments if A delivers as per contract.
   • B cannot reject future installments unless there is persistent default or substantial breach.

Case Law References:

1. Kedar Nath v. Union of India AIR 1954 SC 123:
   • In installment contracts, partial default allows rejection only of defaulted installment, not entire contract, unless it substantially affects the contract.
2. Raghunath v. Moti Lal AIR 1960 All 231:
   • Buyer can claim damages for defaulted installment but cannot refuse remaining installments if seller corrects the breach.

4. Possible Judgement

• A failed to deliver 150 tons in the first month and supplied only 25 tons.
• B is justified in rejecting the first installment, but cannot refuse future installments if delivered as per contract.
• A is liable for damages for short delivery of the first installment.
• Future installments must be delivered according to contract; failure to do so may give B the right to reject subsequent installments.

Judgement:

• B can reject the first installment (25 tons) due to partial delivery.
• B cannot refuse future deliveries if A delivers as per the contract (150 tons per month).
• A is liable for damages for the short delivery in the first installment.
• The contract continues for the remaining installments unless further breach occurs.

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