I.

Whether the arbitral tribunal has jurisdiction to address this Dispute

The Arbitral tribunal derives its power from the agreement entered into by the parties and
it stand as the sine qua non for deriving power in an arbitral proceeding.
I.1. The arbitral tribunal has the power to decide on its jurisdiction.

1. The determination of the question of the jurisdiction of a tribunal lies in its own domain
at least in the first instance by virtue of the principle of kompetenz-kompetenz. The
positive aspect of this power of the tribunal is that it cures the excesses of jurisdiction or
any lack of it by granting an objecting party with immediate remedy thereby saving costs
and time. The first factor worth noting is the existence of a commercial contract between
the parties. By virtue of their consent in such a contract to arbitrate, the parties become
bound to the terms of the agreement and may not depart from them unilaterally. By
submitting to the process of arbitration, the parties must be understood to have put in
place a mechanism for the appointment of an arbitral tribunal to resolve their disputes and
determine their rights and obligations.
2. It is humbly submitted that the joint development agreement provides that in case of any
dispute or difference or claims arising out of or in connection with or relating to the
agreement, or the breach, termination or validity thereof, the parties should resolve such
disputes through mutual discussions1. These pre-escalation2 clauses can be of two kinds,
directory or mandatory. Directory steps are those which may not be performed before
invoking arbitration and mandatory pre-escalation are those which have to be performed
on the failure of which the parties can invoke arbitration3.
3. The Kerala HC in the matter of Nirman Sindia v. Indal Electrosmelts Ltd.,4 Coimbatore
Has held that when the parties to a contract agree to any special mode for resolution of
1
Clause 9.2, Joint Development Agreement
2
IJAL (2014) 6, Judicial Intervention in International Commercial Arbitration: Critiquing the Indian Supreme
Court's interpretation of the arbitration and conciliation act, 1996
3
Aditi Tayal, “Issue of Mandate of Pre-Arbitral Steps/Preceding Steps Before Invoking Arbitration,” SCC Online
Blog (February 12, 2024),
4
Nirman Sindia v. Indal Electromelts Ltd., (2000) 1 Arb LR 144 (India).

MEMORANDUM ON THE BEHALF OF RESPONDENT

 the disputes arising out of the agreement, then they are bound to comply with the mode
prescribed under the agreement. Further, Delhi HC in the judgment of Sushil Kumar
Bhardwaj and Ors. v. Union of India (UOI) and Ors.5 while relying upon the above
judgment of Kerala High Court, has held that the procedure required before invocation of
arbitration is mandatory and not directory. Hence a party is required to first exhaust the
agreed procedure, or the procedure prescribed by the law.
4. The Rajasthan HC in the case of Simpark Infrastructure Pvt. Ltd. v. Jaipur Municipal
Corporation6 has held that where the parties agreed to a particular procedure for dispute
resolution and prescribed condition clause, it is required to be followed.
5. The Bombay HC in the matter of Tulip Hotels Private Limited v. Trade Wings Limited 7
dismissed a petition for the appointment of an arbitrator where the parties had failed to
follow the prescribed pre-arbitral step of conciliation. The court held that where the
parties agree to a specific procedure and mode for settling their dispute by way of
arbitration and prescribe certain pre-conditions for referring the matter to arbitration, they
must comply with those pre-conditions. Negotiations, in good faith, with the aim of
reaching an amicable settlement is one such pre-arbitral steps that may help parties avoid
legal proceedings and provide the parties an opportunity to discuss and settle their
disputes and/or claims with a commercial mind, therefore applying the set precedents in
the present case it becomes inherent for the parties to exhaust the available remedies as
available under the terms of the contracts before moving to arbitration for dispute
resolution.

5
Sushil Kumar Bhardwaj and Ors. v. Union of India (UOI) and Ors., 2009 SCC OnLine Del 4355 (India).
6
Simpark Infrastucture Pvt. Ltd. (M/s.) vs Jaipur Municipal Corporation, 2012 Supp (1) Arb LR 257 (India).
7
Tulip Hotels Pvt. Ltd. and Anr. v. Trade Wings Ltd. and Ors., (2010) 2 Arb LR 286 (India).

MEMORANDUM ON THE BEHALF OF RESPONDENT

 I.2. Whether the appointment of the arbitrator was in accordance with terms of the
contract.

6. § 10(2)8of the Act mentions the procedure of appointment of arbitrators wherein the
parties are free to agree on a procedure for appointing the arbitrator or arbitrators. It is
submitted that one of the foundational pillars of arbitration is the party autonomy
pertaining to the choice of the procedure for appointment of the arbitrator 9. The Supreme
Court, in the case of Datar Switchgears Ltd. v. Tata Finance 10, held that the parties are
required to act as per procedure agreed upon by the parties for appointment of an
Arbitrator and if a party defaults, the aggrieved party can move to the Court against the
defaulting party.
7. The courts have held that the parties are required to comply with the procedure of
appointment as agreed11. The Supreme Court held that the parties must rigorously stick to
the agreement entered into between the two. If the arbitration clause provides for the
manner in which the arbitrator is to be chosen and appointed, then the parties are bound
to act accordingly12. Moreover, the arbitration clause must be constructed strictly for
requiring a mandatory completion of pre-conditions to arbitrate. 13 making the provision
binding upon the parties14. In the present case, the agreement specified that all disputes in
the present case shall be resolved via mutual discussion before appointing the arbitrator
shows it as a necessary step15.

8
Arbitration and Conciliation act, 1996.
9
Sunday A. Fagbemi, “The doctrine of party autonomy arbitration: myth or reality?,” <https://www.google.co.in/url?
Sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahukewicj
10
Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 S.C.C. 15.
11
Utkal Galvanizers Limited v. Power Grid Corporation of India Limited (2014) Del HC.
12
Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151.
13
Oriental Insurance Co. Ltd. v. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534; S.K. Jain v. State of
Haryana, (2009) 4 SCC 357.
14
Emirates Trading Agency LLC v. Prime Mineral Exports Pvt Ltd., (2015) 1 WLR 102.
15
Clause 9.3 of the Joint Development Agreement

MEMORANDUM ON THE BEHALF OF RESPONDENT

 I.3. That the arbitral tribunal is not in line with the law of the land

8. Section 1016 of the arbitration and conciliation act mentions the parties are free to
determine the number of arbitrators, provided that such number of arbitrators shall not be
an even number. It needs to be noted that two arbitrators appointment itself does not
make the arbitral proceeding invalid and in the case of Narayan Prasad Lohia v. Nikunj
Kumar.17 and followed upon in the case of Quippo Construction Equipment Ltd. v.
Janardan Nirman (P) Ltd.18 it was held that if parties insist on an appointment of only
two arbitrators, that does not mean that the agreement becomes invalid. What needs to be
considered is that the parties appoint the arbitrator as an essential ground, in the present
case since the arbitrators was appointed by the court it falls outside the principle of party
autonomy which forms an essential pillar of arbitration.

CONTENTION 1. That there was a Breach of Contract by Karpanai Developers Pvt. Ltd.

It is humbly submitted before this Arbitral Tribunal that there is a clear breach of contract by
Karpanai Developers P. Ltd. on various counts. The term ‘contract’ is defined under §2(h) of the
Indian Contract Act, 1872 as –

“An agreement enforceable by law.”

A contract can be defined as an agreement that holds legal validity and can be enforced in
a court of law. The Contract Act outlines two crucial components of a contract, namely
“agreement” and “enforceability by law”. Therefore, in order to grasp the concept of a contract
as per the regulations stated in The Contract Act of 1872, it is imperative to comprehend these

16
Arbitration and Conciliation act, 1996.
17
Narayan Prasad Lohia v. Nikunj Kumar Lohia, (2002) 3 SCC 572
18
(2020) 18 SCC 277

MEMORANDUM ON THE BEHALF OF RESPONDENT

fundamental terms within the contract's definition. An ‘agreement’ is defined under § 2(e) of the
Indian Contract Act, as –

“Every promise and every set of promises, forming the consideration for each other.”

The term ‘promise’ is defined under § 2(b) as –

“When the person to whom the proposal is made signifies his assent thereto, the proposal
becomes an accepted proposal. A proposal, when accepted, becomes a promise.”

In order to be considered a contract, an agreement must have terms which are legally
enforceable. The contract gives rise to rights and obligations on both parties and these may be
expressly mentioned or be derived from the terms of the contract. Determining the true meaning
of a contract is an iterative process undertaken by courts and involves the interpretation of the
intention expressed by parties. The courts are thus required to decipher the meaning behind the
language used in a contract19.

A Breach of Contract occurs when the terms and conditions agreed upon by the contracting
parties are violated. This violation can take place when one party fails to fulfill their obligations
as stated in the contract, whether partially or completely. It can encompass various scenarios,
ranging from a tenant's failure to pay rent to a landlord, to the inability to deliver a promised
asset. In certain instances, the contract itself may outline the specific procedure for handling a
breach. Alternatively, the contract may offer alternative methods of resolution, such as the
creation of a new contract, adjudication, mediation, or alternative dispute resolution. When a
contract is taken to court, its binding nature ensures that it carries legal weight.

There are multiple factors determining the breach of contract such as the terms of the contract,
the extent of the breach and the impact of the breach on the parties involved. The determination
of a breach is heavily influenced by the terms outlined in the contract. Both the explicit and
implicit responsibilities of the involved parties, along with the specified conditions and
19
Mangala Waman Karandikar v. Prakash Damodar Ranade, (2021) 6 SCC 139

MEMORANDUM ON THE BEHALF OF RESPONDENT

warranties, are crucial in evaluating a breach. In M/S. Alopi Parshad & Sons Ltd. vs. Union of
India20, the court stressed the significance of considering the parties' intentions when interpreting
the terms of a contract. and asserted that the interpretation of a contract should be rooted in the
intentions of the parties involved and the circumstances surrounding the formation of the
contract.

The magnitude of the breach is an additional vital element in ascertaining the suitable
categorization and redress for a contract violation. The seriousness of the breach is commonly
evaluated based on the non-breaching party's anticipations and the extent to which the breaching
party has strayed from their contractual duties. In the instance of State Bank of India vs. Mula
Sahakari Sakhar Karkhana Ltd.21,the court concluded that the defendant's inability to repay a
loan constituted a substantial breach, granting the bank the right to enforce its security interest.
Determining the classification and available remedies for a breach heavily relies on the impact it
has on the parties involved. The appropriate remedy is assessed by examining the losses
experienced by the non-breaching party and the actions taken by the breaching party. In the case
of Food Corporation of India vs. M/S. Kamdhenu Cattle Feed Industries 22, the court underscored
the importance of timely performance in contracts. The plaintiff incurred significant loss as a
result of the defendant's delay in supplying cattle feed, leading the court to grant damages
accordingly.

1.1.That there was non-performance resulting in fundamental breach of contract .

It is humbly submitted that the respondent failed to perform his contractual obligations at
multiple instances, leading to a breach of contract. Breach of Contract refers to the act of
violating the agreed terms and conditions between the parties involved in a contractual
agreement. It was defined as “...an infringement or violation of a promise or obligation,” in 23. It

20
AIR 1960 SC 588.
21
(2006) 6 SCC 293.
22
(1993) 1 SCC 71.
23
(1996) 5 SCC 21.

MEMORANDUM ON THE BEHALF OF RESPONDENT

occurs when one party fails to fully or partially fulfill the obligations outlined in the contract.
This failure to adhere to the contractual terms and conditions is known as a Breach of Contract.

The breach can encompass various scenarios, with the contract itself outlining the specific
process for addressing a breach.

§37 of the Indian Contract Act provides that the parties to a contract must either perform or offer
to perform their respective promises, unless such performance is dispensed with or excused
under the provisions of the Act or any other law. The Respondent failed to perform their
promise, firstly, in failing to provide detailed plans in within the time period agreed to in the
Joint Development Agreement24 and secondly, in failing to obtain sanctions for the development
project. The Petitioner, Mr. Krishna, had made all arrangements and upheld their obligations
under the contract, as evidenced by the timely execution of the Joint Development Agreement,
their commitment to maintaining open communication throughout the project and continuous
engagement in seeking project updates and expressing concerns regarding delays 25. They also
provided all requested information and documents. However, the Respondent, Karpanai
Development Pvt. Ltd. failed to meet project deadlines or give reasonable explanations for their
delay. The Respondent was non-transparent and did not inform the Petitioner about the delays
with regards to the project. At the same time, they took no action to ensure that the work was
sped up post-pandemic, resulting in a fundamental breach of contract.

Fundamental breach is committed when one of the parties to the contract does not fulfill his part
of obligation and fails to complete a contractual term which was very essential to the agreement
that provides another party no opportunity to complete his part of the obligations in the contract.
Since the contractual term that was not fulfilled was so essential to the contract, it provides the
aggrieved party a right to terminate the contract entirely. A fundamental breach happens when a
party against whom the breach has committed, this party has the right to sue the party who has

24
Clause 3.2.4, Joint Development Agreement.
25
Annexure E, Proposition.

MEMORANDUM ON THE BEHALF OF RESPONDENT

breached for damages incurred, and also, he can terminate the contract if he wants to do so 26. A
variety of phrases have been used to understand fundamental breach including that unless it goes
so much to the root of the contract that it makes further performance impossible 27 or unless it
affects the very substance of the contract28.

Art. 25 of the United Nations Convention on Contracts for the International Sale of Goods
defines “fundamental breach” as ‘a breach of contract committed by one of the parties is
fundamental if it results in such detriment to the other party as substantially to deprive him of
what he is entitled to expect under the contract…’. This definition is rather abstract and thus
defers to domestic laws, but still manages to lay certain conditions to test whether or not a
fundamental breach of contract has occurred.

a. The first condition provided is the detriment caused by one party to the other party, which
substantially deprives him of what he is entitled to expect under the contract.

b. The second condition is the foreseeability of the breaching party and a reasonable person
of the same kind in the same circumstances of that resulting detriment.

This definition introduces more objective criteria and compromises between a strict subjective
test and a strict objective test 29. Fulfilling this test, the Respondent failed to maintain the
promised timeline for the development project, which gave space for other contingencies to
delay the project further., thus depriving the Petitioner of what he was entitled to expect under
the Joint Development Agreement.

1.2.That the Respondent failed to fulfill contractual obligations

26
Types & Remedies of Breach of Contract with specifically analyzing anticipatory breach of contract, 2.1 JCLJ
(2021) 665
27
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962) 2 QB 26
28
Wallis, Son and Wells v Pratt and Haynes, (1910) 2 KB 1003
29
A. Lorenz, Fundamental Breach Under the CISG', available at: https://www.cisg.law.pace.edu
/cisg/biblio/lorenz.htmlzfn42, accessed: 12 January 2024.

MEMORANDUM ON THE BEHALF OF RESPONDENT

The impact of novel coronavirus (COVID-19) pandemic has not only affected the physical health
of humans but at the same time it has also impacted the health of economies of all the nations,
and as a result of which businesses are finding it difficult to survive and most of them are unable
to fulfill their contractual obligations. In these tough times, the force majeure clause in business
contracts is gaining importance as a remedy seeker for businesses30.

The term ‘force majeure’ has been defined in Black's law dictionary31 as “an event or effect that
can neither be anticipated nor controlled”. Force majeure is a contractual provision to deal with
uncertain situations due to which contractual obligations could not be performed and these
situations can't be acknowledged at the time of entering into the contract. Now broadly
analyzing, the event of force majeure must pass the following 3 tests:

a. Unpredictability - It involves that the event amounting to force majeure should be

unpredictable and unforeseeable.

b. Irresistibility-The event of force majeure must make the execution of contractual

obligations impossible.

c. Externality-It means that the force majeure event must not be created by the default or
negligence of the party.

While this was an unprecedented event that one could not have reasonably foreseen, certain
contractual obligations were to be fulfilled even while others may have been rendered impossible
in the present matter. There were many instances of non performance of contractual obligations
which were not a result of the COVID-19 pandemic including the delay in presenting
development plans32. Had this not been delayed by over two months, the sanctions would have
been cleared prior to the revision of fees. The second such instance occurred in the applications
for sanctions. The Joint Development Agreement specifically calls upon the developer to make
30
Analyzing the Enforceability of Force Majeure Clause in Light of Covid-19, 2.1 VSLR (2020) 146
31
Meaning of Force Majeure, Black's Law Dictionary (May 22, 2020, 01 : 15 PM),
https : //blacks_ law.enacademic.com/11167/force_majeure.
32
Para 7, Proposition

MEMORANDUM ON THE BEHALF OF RESPONDENT

all applications and file all necessary deeds, and also bear and pay all necessary rents, rates and
taxes to the Government Authorities33. However, neither were the applications filed in time, nor
is the Respondent able to fulfill his duty to pay the revised fees for sanction of plans.

There was a third breach of contractual obligations when the Respondent failed to inform the
Petitioner of the obstructions and delays and the circumstances surrounding them w.r.t the
project until the Petitioner served a notice for the same. The force majeure clause in the
agreement clearly places the responsibility on the impacted party to inform the other party of the
force majeure event within 30 days of its occurrence, including the facts surrounding it, such as
the expected delay. It also demands that the impacted party resumes its obligations as soon as
reasonably practicable34.

The first major case interpreting the provision of force majeure after COVID-19 was Halliburton
Offshore Service v. Vedanta Limited35 wherein the court noted that alleged non-performance of
the contract cannot be executed on the ground of force majeure as claimed by petitioner. The
Court acknowledged that COVID-19 was very much a force majeure event, but at the same time
held that delay on account of the petitioner was not due to COVID-19 since it was before the
lockdown was announced by the government. The Court also observed that simply enforcing
COVID-19 as a force majeure clause will not absolve the liability of parties to contract and they
need to show that the non-performance was the direct result of COVID-19 and therefore this is to
be determined from facts & circumstances of each case. The court then gave certain guidelines to
test if the defense of the force majeure clause would apply. These are :

a. Conduct of parties before outbreak

b. Deadlines for completion in contract

c. Steps that were taken to complete the contractual obligation

33
Clause 7.1.1, 7.1.2, 7.1.3, Joint Development Agreement, Proposition
34
Clause 11.2, Joint Development Agreement, Proposition
35

MEMORANDUM ON THE BEHALF OF RESPONDENT

 d. Other compliances that were required to be made.

In the current scenario, the behavior of the Respondent before the occurrence of the outbreak was
indifferent and relaxed concerning the project's delays and sluggish advancement and the
deadlines weren’t met even before the challenges of the pandemic arose.

1.2.1. That there was non – conformity with stipulations of time as given under the agreement.

In case of a contract regarding immovable property, time is normally not the essence of the
contract. However, this is not an absolute proposition and has several exceptions. The principle
at common law was that, in the absence of a contrary intention, time was essential, even though
it has not been expressly made so by the parties. 36 Performance, therefore, must be completed
upon the precise date specified, otherwise the contract might be brought to an end 37. Essentially,
the rule is that unless a contrary intention is clearly shown, a time fixed for delivery in a contract
for the sale of goods must be exactly observed38.

Question whether or not time was of the essence of the contract would essentially be a question
of the intention of the parties, to be gathered from the terms of the contract 39. The Agreement
specifically mentions deadlines40 for each step of the project, which was agreed to by both
parties, clearly shows both an intention and an agreement to abide by these guidelines. The
developer, M/s Karpanai failed to stick to these guidelines within the first phase of the project
and this has had a domino effect on the rest of the project.

It is due to this initial delay that the Respondent now must deal with an unreasonable increase in
fee for sanction on development plans. The fee now amounting to Rs. 135 lakhs 41, makes the
project unviable from the get go and leaves the budget scattered. This was addressed by Chitty

36
v k kumaraswami chettiar & others versus p a s v karuppuswami mooppanar lnind 1952 mad 202
37
Parkin v. Thorold (1852) 16 Beav. 59
38
Bowes v. Shand (2 A.C. 455)
39
McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181
40
Clause 3.2.4 of the Joint Development Agreement, Proposition
41
Para 12, Proposition

MEMORANDUM ON THE BEHALF OF RESPONDENT

who commented that, “time may be implied as essential in a contract, from the nature of the
subject-matter with which the parties are dealing. If, therefore the thing sold be of greater or less
value according to the effluxion of time, it is manifest that time is of the essence of the contract
and a stipulation as to time must then be literally complied with in Equity as well as in Law”. A
contract relating to commercial enterprise the Court is strongly inclined to hold time to be
essential, whether the contract is for the purchase of land or for such purposes or more ‘directly
for the prosecution of trade’42.

1.2.2.That there was no communication with regards to untoward developments by

Karpanai

The agreement in the given instance asks for the application of the Doctrine of Good Faith. The
term ‘good faith’ has been interpreted in various ways with some saying that it means honesty
while others say that it implies reasonability. Yet others say that it is the lack of bad faith. This
doctrine is greatly used to interpret contracts and also operates as a standard to create a binding
obligation on the parties. It enables judges to consider the parties relationship in its origin and all
its effects, within the framework of all surrounding circumstances and the conduct of the
parties43.

In Bhasin v. Hrynew44, the court held that good faith is a general organizing principle of the
common law of contract which underpins and informs the various rules in which the common
law, in various situations and types of relationships, recognises obligations of good faith
contractual performance. In pursuance of this principle, the Respondent was duty-bound to
maintain regular communication with the Petitioner as to the progress of the development
project, however, they failed to do the same. Even after a notice was served, the Petitioner was

42
Chitty, Joseph, -1838. Chitty on Contracts. London :Sweet & Maxwell, 2004
43
Martin Schermaier, Bona Fides in Roman Contract Law 81-82 (Reinhard Zimmermann and Simon Whittaker
(eds), Good Faith in European Contract Law, 2000).
44
Lombardi Engineering Limited vs. Uttarakhand Jal Vidyut Nigam Limited (06.11.2023 - SC) :
MANU/SC/1210/2023

MEMORANDUM ON THE BEHALF OF RESPONDENT

afforded very little clarity on the situation and it was only after a notice of termination was
served, that the Respondent started communicating effectively.

The Respondent also failed to notify the Petitioner of the force majeure events and their
consequences, despite multiple events which would lead to delays. There was repeated failure to
abide by the terms of the force majeure clause of the agreement including the 30 day limitation
period within which a notice of force majeure event should have been sent to the Petitioner. Not
only this, they also failed to resume performance as soon as possible and were not able to file the
applications for sanction for another 5 months. The Respondent has thus forfeited their right to
make use of the force majeure clause.

MEMORANDUM ON THE BEHALF OF RESPONDENT

3. That the termination of contract is valid

In the given instance, the Respondent will be unable to meet deadlines or fulfill their contractual
obligations as agreed to, in the final contract. In the case of Air India Ltd. v. Gati Ltd. 45, the
arbitral tribunal discussed §39 of the Indian Contract Act, 1872. It gives the right to the promisee
to put an end to the contract if the promisor, in this case Karpanai Development Pvt. Ltd., “has
refused to perform, or disabled itself from performing, its promise in its entirety.” It refers to
repudiatory breach of a contract wherein a serious breach of contract allows the aggrieved party
to either accept the breach and terminate the contract or affirm the contract and continue with its
performance. This type of breach typically occurs when one party refuses or is unable to perform
their contractual obligations46.

In the Australian case of Tramways Advertising Pty Ltd v. Luna Park (NSW) Ltd, The Bench
commented: “The test of essentiality is whether it appears from the general nature of the contract
considered as a whole, or from some particular term or terms, that the promise is of such
importance to the promisee that he would not have entered into the contract unless he had been
assured of a strict or substantial performance of the promise, as the case may be, and that this
ought to have been apparent to the promisor.”

The initial delay in meeting project deadlines has resulted in a situation wherein multiple factors
obstruct the happening of the fundamental objective of the contract, rendering it non-
performable. In the given instance, Karpanai has made it impossible to fulfill their contractual
obligation of building an 8 storey luxury commercial and residential complex and the
fundamental objective of the contract can no longer be met. At the same time, the increase in
sanctions makes it financially unviable to continue to invest in such a project, defeating the
purpose of the contract. It is imperative to highlight that none of these factors, be it the fee for
45
2015 SCC OnLine Del 10220
46
Breach of contract in India: Types, cases, and remedies De Facto Law,
https://www.defactolaw.in/post/understanding-breach-of-contract-in-india (last visited Feb 12, 2024)

MEMORANDUM ON THE BEHALF OF RESPONDENT

sanction of development plans or the stay on construction of buildings about 4 storeys would
have affected the project had it been carried out in time initially.

Further, as given under the Force Majeure clause in the Agreement 47, the delay remained uncured
despite an almost 2 year setback, giving the Petitioner the rights to terminate the agreement by
notice. The Respondent failed to send a notice of information regarding the force majeure events
despite having been required to do so at different instances. There was no adherence to the 30
day limitation period either. Section 55 of the Contract Act deals with failure to perform a
contract within the agreed time. In the event, time is of the essence, failure to perform an
obligation within the stipulated time renders the contract voidable at the option of the innocent
party. In such cases, the innocent party is entitled to either :

a. Terminate performance of the contract;

b. Claim damages from the breaching party on the basis that it has committed a fundamental
breach of the contract.

In Scarf v. Jardine48, it was held that if the innocent party elects to terminate the contract, he
must make his decision known to the party in default. Once he has done this, his decision is final
and cannot be retracted. The effect is to terminate the effect of the contract for the future as from
the moment when the acceptance is communicated to the party in default. The previous existence
of the contract is still relevant with regard to the past acts and defaults of the parties. Thus the
party in default is liable in damages both for any earlier breach and then also for the breach that
led to the discharge of the contract, but he is excused from further performance 49. So, the
Petitioner may terminate the contract and seek damages and compensation for any loss caused.

47
Clause 11.2, Joint Development Agreement
48
Benjamin Scarf v. Alfred George Jardine, (1882) 7 AC 345
49
Mussan v. Van Diemen's Land Company[1938] 1 Ch. 253 at p. 260.;
International Film Co. Ltd. v. Murlidhar Chatterjee, 1939 SCC OnLine Cal 156

MEMORANDUM ON THE BEHALF OF RESPONDENT

4. THAT KRISHNA CAN VALIDLY CLAIM DAMAGES
It is humbly submitted that after the parties have made their agreement, unforeseen contingencies
may occur which prevent the attainment of the purpose that they have in mind.

The case of paradise v. Jane50 laid down what is some- called the rule as to absolute contracts. It
amounts to this: When the law casts a dry upon a man which, through no fault of his, he is unable
to perform, he is excused non-performance, but if he binds himself by contract absolutely to do a
thing, he escapes liability for damages for proof that as events turned out performance is fails or
even impossible. The rationale for principle is that a party to a contract can always guard against
unforeseen contingencies by stipulation; but if he voluntarily undertakes an absolute and
unconditional obligation he cannot complain merely because events turn out to his disadvantage.

For instance, if a builder agrees to construct a house by a certain date and fails to do so because a
strike occurs51 . He is liable in damages notwithstanding that no guano is obtainable.52

Every breach of contract upsets many settled expectations of the injured party. He may feel the
consequences for a long time and in a variety of ways. For a claim of damages and affixing
liability, there has to be a causal connection between the breach committed and the loss or injury
suffered. This causal connection is said to have been established if the act of the defendant
amounting to breach of the contract is the only ‘real and effective’ cause in relation to the injury
or damage for which damages are claimed;53

The english court in the case of Alexander v. Cambridge Credit Corp Ltd., McHugh 54 states
when JDA stated that the applicable tests ought to be decided on the basis of the facts and
circumstances and not limited to the ‘but for’ test, rather, a commonsensical approach is to be
adopted to establish a causal connection between the breach of the contract and the loss or injury.

50
(1647) Aleyn Simpson 91 LQR 243
51
Budgett & co v. binnington & co [1891] 1 QB 35
52
Hills v Sughene(1846) 15 M & W 253
53
Kanchan Udyog v. United Spirits Limited (2017) 8 SCC 237; see, Gray v. Barr [1971] 2 All ER 949 (CA).
54
(1987) 9 NSWLR 310

MEMORANDUM ON THE BEHALF OF RESPONDENT

The same principle was applied in the case of Pannalal Jankidas v. Mohanlal and another 55 The
hon’ble supreme court had stated that neglect of duty of the defendant to keep the goods insured
resulted in a direct loss of claim form the government.

The settled principle of law is that the defendant will be accountable for the loss of profits which
come within the directly related or emerging from the contractual breach, In the present case loss
of profits due to delay in delivery of a relevant material by the defendant 56, with the general
expectation of profit.57

In the case M/s A.T. Brij Paul Singh & Ors. v. State of Gujarat 58 the court emphasized that
where unreasonable delays in delivery of machinery lead to loss of profitable contracts which
were dependent on such machinery, and was known to the party expected to supply the
machinery, damages can be claimed for such loss of profits that could have been made but not
for the loss of the contract that could have been procured 59 Further, a party may also claim for
loss of opportunities or loss of chance of gaining something, which results from a contractual
breach. This is to compensate the innocent party, who is deprived of the chance to receive a
particular benefit or avoid a particular risk, due to a contractual breach60.

Therefore, in the present case Karpanai shall be liable to pay damages to Krishna. These
damages may be calculated by appointing or hiring an expert to quantify loss and damages. The
Supreme court in the case of G.L. Sultania v. Securities and exchange board of india,61
emphasized upon relying on the expert testimony in cases of complex nature to ascertain losses
or damages.

55
AIR 1951 SC 144
56
Indian Contract Act 1872, s 73 (illustration i); see, M/s A.T. Brij Paul Singh & Ors. v. State of Gujarat (1984) 4
SCC 59.
57
A.T. Brij Paul Singh v. State of Gujarat, (1984) 4 SCC 59; Dwaraka Das v. State of Madhya Pradesh AIR 1999
SC 1031
58
Ibid.
59
Ibid.
60
Mahanagar Gas Ltd. Mumbai v. Babulal Uttamchand & Co., Mumbai (2012) 4 Mh.L.J 344
61
AIR 2007 SC 2172.

MEMORANDUM ON THE BEHALF OF RESPONDENT