Under a contract of sale of 100 barrels of rum made from molasses, 50 barrels were delivered. The buyer pressed for delivery of the remainder, but the seller delayed. In the meantime, distillation of spirits from molasses was prohibited by an Act of Parliament and all contracts for the sale of such spirits stood annulled. Is the seller liable in damages as having failed to deliver the remaining 50 barrels of rum?

The Statutory Basis for the Seller's Discharge

Section 13(3) of the Sale of Goods Act expressly preserves the seller's right to plead impossibility of performance as a defence where he is sued by the buyer for non-delivery, and the words "excused by law or otherwise" in this context are wide enough to cover a supervening statutory prohibition. This provision draws upon the wider principle embodied in Section 56 of the Indian Contract Act, 1872, dealing with agreements to do an impossible act, which continues to apply to contracts of sale by virtue of Section 3 of the Sale of Goods Act. Where an Act of Parliament is passed after the contract is made, prohibiting the very performance that was earlier lawful and contracted for, the contract becomes impossible of performance by supervening operation of law, and the party who would otherwise be liable for non-performance is discharged from further obligation as regards the unperformed portion.

Application to the Rum Contract

Here, the contract for the sale of 100 barrels of rum made from molasses was entirely lawful when made, and 50 barrels were validly delivered under it, presumably before the change in law. Once the Act of Parliament prohibiting distillation of spirits from molasses came into force and expressly annulled all contracts for the sale of such spirits, performance of the remaining, unexecuted part of the contract — delivery of the other 50 barrels — became not merely difficult but positively unlawful. The seller could not thereafter deliver the remaining rum without contravening the statute, and no court would compel, nor hold him liable in damages for failing to perform, an act that the law itself had rendered illegal and had, in terms, declared such contracts annulled. This is precisely the sort of supervening impossibility contemplated by Section 13(3), read with Section 56 of the Contract Act — the seller stands excused by law from further performance.

Does the Seller's Prior Delay Change the Position?

The more difficult question is whether the seller's earlier delay in delivering the remaining barrels — before the Act was passed — exposes him to liability independent of, and unaffected by, the subsequent prohibition. This turns on Section 11 of the Sale of Goods Act, which provides that, unless a different intention appears from the terms of the contract, stipulations as to time of delivery are not necessarily of the essence of a contract of sale, and whether any such stipulation is of the essence depends on the terms of the particular contract. On the facts, nothing indicates that a specific time for delivery of the remaining 50 barrels had been fixed and expressly made essential, nor that the buyer had, before the change in law, given notice fixing a definite date and treating time as of the essence, nor that the buyer had elected to treat the seller's delay as a repudiatory breach and rescinded the contract before the Act intervened. Mere delay, where time is not of the essence, sounds at most in a claim for damages for the delay itself, but it does not by itself terminate the contract or crystallize the seller's liability for the substantive non-delivery independently of subsequent events — the contract remained alive, and its remaining obligations still capable of being discharged by supervening impossibility, right up to the moment the prohibitory Act came into force.

The Governing Distinction: Breach Already Complete vs. Contract Still Subsisting

Had the buyer, before the passing of the Act, already treated the seller's delay as amounting to a breach going to the root of the contract — for instance, by fixing a reasonable time for delivery, that time having expired, and by then electing to rescind and sue for damages under Section 57 for non-delivery — the seller's liability for damages would have already accrued and become fixed as an existing cause of action, unaffected by any later legislative prohibition, since the wrong would have been complete before the law changed. But where, as here, the contract remained subsisting and mere delay short of a repudiatory breach persisted, the subsequent Act operates upon a still-live contractual obligation and discharges it in its entirety as to the unperformed balance, since the impossibility arose "before the risk passes" in the sense of before the seller was found in a position of accrued liability distinct from the underlying obligation to deliver.

Illustration from the Broader Principle

This reasoning parallels the broader principle recognised in relation to Section 7 and Section 8 of the Sale of Goods Act, dealing with goods perishing before and after the agreement to sell — the touchstone in each case being whether the intervening event operates upon a still-subsisting contractual obligation, thereby avoiding it, as opposed to a case where the seller was already in clear, complete breach independent of the supervening event. Just as an agreement to sell specific goods is avoided where the goods perish through no fault of either party before risk passes, so too a contract to deliver goods whose very production or sale is subsequently outlawed by statute is avoided as to the unperformed part, provided the seller's default had not already ripened into an independent, accrued liability before the law intervened.

Decision

The seller is not liable in damages for the non-delivery of the remaining 50 barrels of rum. The subsequent Act of Parliament prohibiting distillation of spirits from molasses, and expressly annulling contracts for their sale, discharged the seller from further performance of the unexecuted portion of the contract under the principle of supervening impossibility recognised in Section 13(3) of the Sale of Goods Act read with Section 56 of the Indian Contract Act. The seller's earlier delay, absent any indication that time was of the essence or that the buyer had already treated the delay as a completed breach before the Act came into force, does not deprive him of this defence, since the contractual obligation to deliver the remaining barrels was still subsisting, and hence capable of being discharged, at the moment the prohibitory legislation took effect.

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