المحكمة العليا

القضاة :

سعادة السيد / علي يوسف الولي                قاضي المحكمة العليا         رئيساً

سعادة السيد / جون وول ماكيج                 قاضي المحكمة العليا         عضواً

سعادة السيد / حيدر مصطفى حمد               قاضي المحكمة العليا        عضواً

الأطراف :

محمد منصور راجي               طاعن

//ضد//

حاتم  محمد صادق             مطعون ضده

النمرة م ع/ط م/494/1989م

المبادئ:

المعاملات المدنية – الفسخ الحكمي للعقد لعدم دفع الثمن – شرطه

 إذا اتفق الطرفان المتعاقدان على أن صحة البيع مشروطة بسداد القيمة فعلى المحكمة أن تقضي بفسخ العقد في حالة فشل سداد القيمة أو أي جزء منها في الوقت المحدد في العقد وذلك بشرط أن تكون ملكية المبيع لا زالت عند البائع فإذا انتقلت  الملكية للمشتري قبل سداد القيمة فلا سبيل لإلغاء العقد ولو توفى المشتري مفلساً

الحكم:

الحكـــــم

JOHN WOOL MAKEG:

1281995

Mohd Mansur Raji, the respondent/applicant, is the registered owner of house No 9/2 QNo(1) West Bahri By means of a written contract, Mohd ( to be referred to hereafter as " the seller " ) sold flat No (1) from this house to El Saddig or the applicant/defendant ( to be referred to as " the buyer ) for a sum of Ls 3,167,500 ( three millions, one hundred and sixty seven thousand and five hundred pounds ) It was agreed first that the price was to be paid by four instalments Four cheques were issued by the buyer The first for Ls 1,100,000 and to be cashed on 25/9/1992, the 2nd for Ls 690,000 to be cashed on 15/12/1992 the 3rd for Ls 690,000 to be cashed on 15,3,1993, and the 4th for Ls 632,500 to be cashed on 15,6,1993

The first cheque , on the date of its maturity  was cashed But subsequently the parties amended the contract by an oral agreement, amalgamating all the remaining values for the three cheques into one cheque cashable on 15,6,1993 On the date of the maturity of the choque it was presented to the bank for payment but it was referred to drawer for lack of funds in the buyer's account The seller then proceeded to raise a suit in the Court praying the court to abrogate the contract by restoring the status quo and order, interalia, the re-delivery of the sold flat to the seller The buyer disputed the recision of the contract and the restoration of the contracting parties to their former status The district judge tried the case and recinded the contract and passed other orders as were requested by the seller However, on appeal to the court of Appeal by the buyer, the decree was reversed Consequently, the seller brought this objection to the Supreme Court The seller's advocate attacked the decision of the Court of Appeal on three grounds, namely:

(a) that the Court of Appeal misunderstood the law and the relevant general principles; and

(b) that the court of appeal erred in the evaluation of the evidence and

(c) that the decision of the Court of Appeal contravenes the Sharria law But this is just generalised charge but there is no mention of a specific Shatia rule or general principle which has been violated and how

Ground (b) which refers to the evaluation of evidence is not this Court's business This court deals only with disputes over issues of law It may intervene on issues of facs in a very limited way None of thoseways is visible here I am therefore left with ground (a) to consider as it claims the misapplication of the law

The seller mainly relies on a clause in the contract which provides that:)

Where the first party or seller fails to cash the cheque on the date of its maturity on the ground of lack of fund in the buyer's account the buyer is under the obligation to restore or re-deliver to the seller ( Ist party ) the flat ( ie the subject matter of sale ) which had been sold after the refund to him of the part of the selling price already paid to the seller :

The question we are required to determine here is:

Must the court declare the rescission of the contract between the disputing parties in this case and order the restoration of their previous position ( iestatus quo ) on the ground of the dishonour of the cheque by the bank as a result of the non-availability of funds in the buyers (2nd party ) account on the date of the maturity of the cheque he had drawn in the name of the seller ( Ie Ist party )?

The answer to this question depends on whether or not the title to or ownership of the subject - matter of this contract had passed or not to the buyer at the time of the conclusion of the contract

Before the determination of the answer to the abovementioned question I would like to look into the law on  which the Court relied for its judgement The Court relied on the provisions of S 128(2) of Civil Transactions Act,  1984 which states:

" The judge may grant time to the debtor if it is required by the circumstances The Judge may also reject an application for recission ( of the contract ) when the part of the contract which the debtor has failed to perform is of little importance in comparision with the obligation in its entirety"

The Court relied on the last part of this provision, that is; the part which confers a discretionary power on the court to reject the creditor's request for the recision of the contract Where the Court thinks that the debtors failure relates only to a small portion of his entire obligation under the contract, it may under its discretionary power reject the request for the recission of the contract Significantly the debtor or the buyer in our case, cannot be made to suffer when he has already discharged the bulk of or the greater part of his general obligation under the contract

When we look into the case before us, can we come to the conclusion that the buyer ( or the second party ) has already discharged greater part of his entire obligation?

His entire obligation under the contract is the payment of the whole selling price for the flat which is over three million pounds He only paid about one third of his general obligation Consequently, more than two thirds of his entire obligation remains undischarged Which is greater than one third or two thirds? of course, the answer is obvious The unpaid cheque contained over two million pounds The buyer ( or debtor ) only discharged a little part of his entire obligation and therefore S 128(2) of Civil transactions Act, 1984 does not apply Conversely the court of Appeal relied on an irrelevant legal provision

The applicant's lawyer on the other hand, after attacking the application of S 128(2) (Supra) , states that the relevant legal provision which the court of Appeal should have relied upon is S 129 which states:

" The parties may agree that in case of non-performance of an obligation flowing from the contract, the contract shall be deemed to have been rescinded ipso facto without a court order Such an agreement does not release the parties from the obligation of serving formal notice unless the parties expressly agree that such a notice will be dispensed with"

The relevant part of this provision is the first part which talks of the recission of the contract automatically where a breach of contractual obligation has been committed by one of the contracting parties

This automatic recission of the contract on an account of the breach of a contractual obligation has a generality For example it can be applied to contracts for work such as contractes to build houses or roads or contracts for transport etc It can also to a limited extent, apply to cases of sale of goods or property, such as the one before us; but not when the title to the property sold has passed from the seller to the buyer

This takes me to what I have already stated that the answer to the question for determination depends on whether or not the title to the sold property has passed from the seller to the buyer at the time of conclusion of the contract

The relevant legal provision on the point can be found in s 214 of Civil Transactions Act 1984 which states:

" If a certain date is fixed for the [payment of the price and it is stipulated that unless the price is paid by that date there is no sale, the sale shall be considered as impliedly rescinded if no price is so paid and the thing ( subject matter ) sold is still in the sellers hand"

This section deals with cases where the contracting parties have at the date of the conclusion of this contract decided to defer  the payment of the price to a certain date in a future  period It determines what happens to the contract if the buyer fails to pay the selling price (or part of it) to the seller on the date which had been fixed for its payment In such circumstance, the Court must look into the terms of the contract made by the parties Where it is found that the parties made the payment of price on the fixed date a condition precedent to the continued validity of the contract thereafter the Court shall be bound to follow what the parties had agreed In this circumstance the Court shall declare the contract abrogated But the Court acting under this section follows this course only where the title to or ownership of the subjec matter of the conrtact has not yet passed from the seller to the buyer

What must the Court, then do where the title to or ownership of the property has passed to the buyer?

The court must still make a recourse to the provisions of the same section 214 where it says:

" the sale shall be considered as impliedly rescinded if no price is so paid and the thing sold is still in the seller's hand"

It is clear here that the court is entitled only to declare the recission of the contract for non - payment of price on the fixed date for payment provided the " thing sold" is still in the seller's hand It is also so obvious from the terminology of this section that if the " thing sold" has been delivered or passed to the buyer, the contract cannot be declared rescinded for failure to pay the price on the fixed date for payment The passing or delivery of the thing sold to the buyer, in this context, implies the transfer of title from the seller to the buyer

S214 (above) is re-inforced by other sections in Civil Transactions Act, 1984 For example S 209(1) of same law states,

" If the buyer in the seller's presence took possession of the thing sold before payment of the price without the latter stopping him the seller's omission shall constitute permission to possess the thing sold "

The seller's omission to stop the buyer from taking the possession of the thing sold means in the conception of this legal provision that the seller has impliedly or by his conduct transferred or accepted the transfer of title to the thing sold from him to the buyer

In such cases where the seller is demed to have permitted the taking of the thing sold by the buyer ( or essentially the taking of title by the buyer ) from him he is not entitled to recover it on ground of the breach by the latter This fact is clear from the wording of clause (2) of same section 209 which entitles the seller to recover the thing sold for non - payment of price where the buyer obtained its possession ( before payment of price ) without his ( ie seller ) permission (implied or expressed) It is implicite from clause (2) that if the seller expressly or by conduct permits the buyer to take the thing sold before the payment of price, he is not entitled to recover it because the latter has failed to pay the price on the fixed date

Once the thing sold has passed from the seller to the buyer before the latter has paid the price it cannot be recovered by the said seller even where the buyer has died insolvent The price will be regarded as a debt against the estate of the deceased buyer ( see S 115 of civil transactions Act, 1984)

Precisely, where the contracting parties have stipulated that the payment of price of goods or property on a fixed date is a condition precedent to the validity the contract abrogated if there is a failure, on the part of the buyer, to pay the price or the balance of the price on that fixed date, provided that the subject matter or the thing sold still remains in the seller's hand In other words the title to the goods or property sold must still remain vested in the seller The evidence of the seller's retention of the title or ownership is the actual physical control of the goods or property However where the title or ownership has passed to the buyer ( ie the passing of title being overtly evidenced by the transfer of possession or the physical control of the property sold ), the seller is not entitled to recover the property upon the buyer's failure to pay the price on the fixed date

The question then is what is the remedy of the seller in suvh circumstance? The answer is simple He is entitled to request the court to order specific performance of the contract by the buyer

In conclusion, therefore, we must reject the seller's claim of the recission of the contract on the ground of non-payment of the price on the fixed date although the parties had agreed to make such payment of the balance of price as a condition precedent in the contract we must rely on the provisions of s 214, and other stated sections of Civil Procedure Act, 1984, for our refusal to grant the seller's request because it is already established in evidence that the sold flat, subject of this dispute had been passed to the buyer In other words its title has passed to the buyer and it cannot be recovered by the seller on account of the non-payment of the balance of price

The only remedy left to the seller who is the applicant in our case, is right to request the court to order specific performance or enforcement of the contract

On these grounds I come to the conclusion reached by the Court of Appeal ( not on their reasons for reaching the conclusion) and reject the objection But I must emphasise that the seller's right to recover the balance of the price is not affected by this judgement

ALI YOUSIF ALWALI

2081995

I concur

I have none to add to the Comprehensive judgement of my learned colleague Mr Justice John except that:  according to section 214 Civil Transactions Act 1984, a contract of sale cannot be considered as rescinded unless two conditions are fullfiled:

1- The price is not paid

In the suit before us, failure to pay the price on date stipulated in the conrtact of sale is proved but the flat sold is not in the hands of the seller ( applicant ) as far as it is in the possession of the Respondent ( the buyer ) and hence rescission of the sale contract of the flat is impossible

HAIDER MUSTAFA HAMAD

3081995

I concur